Committee on Budgetary Oversight díospóireacht -
Wednesday, 6 Dec 2023

Supplementary Estimates for 2023: Minister for Public Expenditure, National Development Plan Delivery and Reform

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

We are now in public session. I welcome the Minister for Public Expenditure, National Development Plan Delivery and Reform, Deputy Paschal Donohoe, and his officials to the meeting to discuss the Supplementary Estimates for 2023.

Before we begin, I want to explain some limitations on parliamentary privilege and the practice of the Houses as regards references that may be made to another person in their absence. This is very official. Witnesses are protected by absolute privilege in respect of the presentations they make to the committee. This means they have an absolute defence against any defamation action for anything they say at the meeting. However they are expected not to abuse this privilege and it is my duty as Chair - I did not know I had this duty but it is interesting to know - to ensure this privilege is not abused. Therefore, if witnesses' statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with such direction.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the place which Parliament has chosen to sit, namely, Leinster House, to participate in public meetings. I will not permit a member to participate where they do not adhere to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting, the ultimate censure. As a former Ceann Comhairle use to say, a little bit of levity does not go astray.

I invite the Minister to make his opening statement.

Minister for Public Expenditure, National Development Plan Delivery and Reform (Deputy Paschal Donohoe)

I thank the Cathaoirleach Gníomhach and the committee for the invitation to attend the meeting today to discuss the Supplementary Estimates for 2023. The Revised Estimates for 2023, published last December, set out planned expenditure of €91.1 billion. This funding was put in place to support the delivery of better public services, living standards and infrastructure for the people of Ireland. Departmental allocations across a broad range of services, schemes and programmes were agreed based on the best available information.

However, in any year developments may arise within Departments which require additional funding. Budgeting over recent years has taken place in a constantly changing economic and social context. This has included a pandemic, the outbreak of war and high inflation. These challenges have required a responsive approach from Government, both in the formulation of budgetary policy in our permanent Estimates process and as events have unfolded.

I am pleased to report the continued strength of our economy despite the global economic developments. Modified domestic demand, which is an important indicator of the performance of our domestic economy, is holding firm on the back of significant growth in recent years. Our jobs market is strong. The performance of tax revenue has improved, with cumulative end-November tax receipts, published yesterday, €4.5 billion or 5.8% ahead of last year.

Most significantly, inflation continues to fall, with price increases of 2.3% recorded in the 12 months to November. This is far lower than the 9% recorded in the 12 months to November 2022. The development will ease pressures on households and businesses in the coming period. Overall, this strong economic performance enables us to comprehensively respond to the range of externally driven challenges while also protecting investment in our day-to-day services and infrastructure plans.

I now wish to turn to the specific detail of today’s meeting, that is, the Supplementary Estimates process. It provides a mechanism to change the allocation of funding to a Vote and can be technical or substantive in nature. The technical Supplementary Estimates, which have no additional net funding impact other than a token amount of €1,000, arise where funding is available within a Vote to redistribute to areas with increased costs. Where any expected savings are not sufficient to cover the cost of the additional demands within a Vote, a substantive Supplementary Estimate may be required to provide additional funds.

In 2023, a total of 31 Supplementary Estimates were required, eight of which were technical. The remaining 23 were substantive, representing an additional €6 billion in gross expenditure or €5.5 billion in net expenditure terms. This significant level of Supplementary Estimates required arose due to a range of in-year developments, including our response to cost-of-living challenges, the higher demand for the provision of supports for those arriving into Ireland, and additional demand facing our public services, particularly in health and education.

The Revised Estimates of 2023 originally set out a contingency of €1.2 billion. This funding was utilised to fund the €1 billion Supplementary Estimate for the Department of Children, Equality, Disability, Integration and Youth in September. The rest of the substantive Supplementary Estimates necessitated an increase of €4.8 billion in the Government expenditure ceiling, which now stands at €95.9 billion. The actual end-year expenditure position for 2023 will be published in the December fiscal monitor report. The final outturn will be further refined and published in our appropriation accounts.

The largest Supplementary Estimate requirement related to the Department of children at a cumulative value of €1.26 billion. This will bring the total allocation for 2023 to €7.1 billion. The additional funding is required to support policy areas, including Tusla, disability services and the International Protection Accommodation Service, IPAS. The largest area is providing accommodation supports for people fleeing the war from Ukraine. Demand across these policy areas has increased greatly in recent years, driven by global events such as the pandemic and the war in Ukraine.

Since the invasion of Ukraine, the UN Refugee Agency estimates that more than 94,000 people have arrived in Ireland seeking humanitarian assistance, mainly women and children. The number of Ukrainians in State-supported accommodation has increased from 54,000 at the end of 2022 to more than 74,000 currently. At the same time, the numbers in IPAS accommodation have also continued to increase from 19,000 at the end of 2022 to 26,000 currently. This means the State is now providing accommodation for 100,000 people seeking refuge, which is an unparalleled figure in the history of the country. The work of all involved in supporting them must be commended.

With regard to the Department of Health, the required gross Supplementary Estimate in 2023 is €1,034 million, which is a 4.8% increase over the initial allocation. This is driven by a number of factors, including increased demand and activity, especially in the acute hospital sector, ongoing Covid-related expenditure in acute and community settings and other demand-led areas, such as primary care reimbursement, as well as State claims and pensions costs. The Government fully acknowledges that providing health services, particularly in the acute sector, is complex. There are a number of factors impacting on both demand for services and the configuration of service provision. The 2024 allocation for health recognises that the health services continue to experience a challenging and uncertain environment, especially in the aftermath of Covid-19.

In addition to significant core funding, the Department of Health has been allocated €1 billion in non-core funding to fund the post-pandemic escalation of health sector costs as a result of increased activity and demand across acute hospitals. This high level of resourcing represents an increased allocation of non-core funding. It is an additional €500 million euro of expenditure beyond the summer economic statement, SES, parameters, reflecting the prioritisation of health by the Government. The overall health allocation has now increased by more than 50% from 2019 to 2024, increasing by €7.4 billion. It is critically important that expenditure management and the overall control environment continues to improve in 2024, and better financial governance with regard to this is key.

Other Votes also required significant additional funding. The Department of the Environment, Climate and Communications received €900 million to fund three electricity credits over the course of winter 2023-24. The Department of Social Protection €1.13 billion Supplementary Estimate will fund cost-of-living lump sum payments for a range of recipients alongside the Christmas bonus. A further €800 million was provided for the Department of Education to support further progress on the school building programme and additional staffing costs alongside cost-of-living supports and the welcoming of 17,000 children from Ukraine into the school system.

Overall, the level of Supplementary Estimates has been higher in recent years. This coincides with the outbreak of the pandemic and the introduction of non-core expenditure. External shocks, including Covid-19, the war in Ukraine and elevated inflation levels have required a responsive approach to budget policy by Government. These ongoing developments, such as providing accommodation for Ukrainian arrivals and various cost-of-living packages, have necessitated year-on-year changes to departmental allocations.

The Government has signalled our commitment to deliver key public services through this Supplementary Estimates process and through budget 2024. My Department continues to review our expenditure monitoring and management processes to ensure allocations are best informed by the best available information. To that end, regular engagement takes place between my officials and all line Departments to review spending trends. I thank the Cathaoirleach for the opportunity to be here. I look forward to answering the questions of the committee.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

I thank the Minister. I will now offer the issue to the floor and whoever wishes to speak first may do so. I call Deputy Patricia Ryan.

Deputy Patricia Ryan

I thank the Minister and his guests. Does the Minister have any concerns that his Department's approach to existing levels of service, ELS, quotas are greater or have greater reliance on the Supplementary Estimates and that this is not good budget practice?

Deputy Paschal Donohoe

I thank the Deputy very much. The decision regarding the level of ELS is always a really important part of our budget negotiations. I believe that, by and large, the work we do in this regard is accurate. Where we do, of course, have ongoing challenges is to recognise it in how we fund the Department of Health overall and challenges that are there, which I know is a feature of the committee's deliberations. The level of Supplementary Estimates in recent years has been high in number and in value. The main reason for that, however, has been the array of external and unprecedented shocks we have had to deal with and the use we have made of non-core funding, which we are able to decrease when the external shock itself has passed. Of course, while we can always do better in any area of budget management policy, I believe that in the round, the strategies we have put in place have worked, have been appropriate and have been the best way of dealing with economic and health environments that have changed so much with each year that has gone by.

Deputy Patricia Ryan

Following on from that, before or after the Minister's announcement of the health budget for 2023, did any senior official flag to him that the budgets were insufficient to meet demand and execute policy decisions? We all know there are issues with the health budget and we are all aware of how bad things are, but I wonder what the Minister has to say in that regard.

Deputy Paschal Donohoe

At a number of different times in the process relating to the health budget, the Minister for Health and his departmental officials made the case for more funding, but that is a regular feature of the budgetary process. Every Minister that I engage with makes the case for more funding for the services for which he or she is responsible. If we look at the level of funding the Department of Health receives – I know it needs every cent of it, and that it continues to be under pressure in managing the demands for the public services it is responsible for – it stands at €22.4 billion for 2023. If we look at the rate of increase in that funding, it is an increase of €7.4 billion since 2019. I would make the case that there has been a very substantial increase in the level of funding made available to the Department of Health. The Minister for Health and the Department of Health do their jobs, as every Minister does, in making the case for more. In the budgetary process, we have to try to reconcile those demands with the money that the Government has available to spend.

Deputy Patricia Ryan

I take that on board, but is it not particularly bad this year? Were there not more demands made or was it not worse this year than in other years for previous Ministers?

Deputy Paschal Donohoe

No, it was roughly the same as in previous years in term of the expectations that were there for the Estimates process. I have now done lots of them. The expectations are always really high. It may even be a bit higher this year because, undoubtedly, there has been a change in expectations regarding what the State can deliver and what it can fund in the aftermath of the pandemic. Expectations at the start of every negotiation for the spending of every budget are always multiples of the money that the Government has available to spend and this year was no different in that regard.

Deputy Patricia Ryan

Could the Minister confirm whether, to the best of his knowledge, a substantive Supplementary Estimate for health will not be needed next year?

Deputy Paschal Donohoe

I cannot give that guarantee to the committee. It has been an ongoing feature of health budgets in recent years that it has required a supplementary budget, and a substantive one. The level of that supplementary budget has varied over the years. In some years we have been successful in meeting the needs of patients but also containing the Supplementary Estimate to a lower level while in other years it has been higher. Obviously, this is one of the years in which the Supplementary Estimate is at a higher level - in gross terms, just over €1 billion. It would be foolhardy for me to give a commitment to the Deputy that no such Supplementary Estimate will be required next year. What we will be aiming to do across next year is to do all we can to contain it at a lower level, and in an ideal world not to need one at all, but to continue to meet the demands that patients expect of our health service.

I am acutely aware that the work that happens in our hospitals is really tough and amazingly valuable and I also know the great challenges that the Department of Health confronts every day. I am very sympathetic to it but, as always, what I try to do is get the balance right between the money we can allocate to it and the needs that it has, which for every Department are multiples of what I have available to allocate.

Deputy Patricia Ryan

I thank the Minister. I definitely agree with him that matters are very challenging in the area of health. It is even more challenging for those working in the health sector when they are trying to do it with a very little budget. I mean that very respectfully. Does the Minister agree that, in line with the IMF guidelines on public expenditure management, we should never knowingly rely on the use of Supplementary Estimates rather than the standard budget procedure?

Deputy Paschal Donohoe

I would definitely prefer to be in a position whereby we did not need to use Supplementary Estimates. The best practice that the IMF wants us to adhere to makes an awful lot of sense. We try to be in a position where we can avoid using them, but they are needed. At times they are needed because things happen during the year that we do not expect. They also happen because we now have a feature of our budget process where we use non-core funding, which means we allocate funding to Departments within the year, and because we do that we use Supplementary Estimates to do it. I am a big supporter of using a non-core approach for funding because in the absence of doing that, we end up baking in to the spending figures large amounts of money which may not be needed in the future if an external shock passes, like a pandemic ebbing. I fully accept the point of the IMF but it is not always possible to deliver that best practice in the prevailing environment in recent years.

Deputy Patricia Ryan

When the Minister refers to non-core funding, is there anything he is specifically talking about?

Deputy Paschal Donohoe

Yes, I refer specifically to the non-core funding that we have made available in recent years for the two most recent shocks that we have had. I highlight where we have been with the cost of living due to the inflationary surge, and while we could have expected that it was going to happen, few expected it was going to happen with the speed it did.

I would also particularly highlight where we have been with migration challenges and looking after all those who come to our country. Before we dealt with all of that, we had to deal with the pandemic. For me, the pandemic is the greatest example of why non-core funding really works. We were spending tens of billions of euro in non-core funding to deal with the employment wage subsidy scheme, the pandemic unemployment payment and all the funding that the health sector needed. At some times, some people wondered, including myself - even in darker moments - whether we would ever be in a position to be able to stop this funding. We have been able to do so because the pandemic passed. If we had made all that money permanently available to Departments, we would now have rates of Government spending that would be extremely high, despite the fact that the crisis that required the spending has passed. That shows the value of non-core funding.

Deputy Patricia Ryan

I will finish on this point. Does the Minister feel we have enough money now for migration without the core funding? How do matters stand in that regard?

Deputy Paschal Donohoe

As I look forward to next year, when I consider the amount of funding we have allocated to the Department that is responsible for dealing with the cost of migration, I do feel that we are adequately funded there at the moment. Again, that all does depend on migration flows into our country and further policy decisions that the Government will make in the future on how we support the Minister, Deputy O'Gorman, in his really tough work. Yes, I believe that funding is in place but so much of it depends on what happens with migration flows.

The Government had to make a very difficult decision on Tuesday, when we had to indicate that accommodation may no longer be available to those who come to our country, and that we would make a payment available instead. That is driven by the availability of accommodation rather than a lack of funding. With the information that is available to me at the moment, I believe we will have the funding in place but, again, I cannot give the Deputy a cast-iron commitment in regard to that because it is very difficult to forecast what next year will bring in migration flows.

Deputy Patricia Ryan

I just want to be clear that I have picked that up right. Is the Minister saying that there is a lack of accommodation rather than a lack of funding?

Deputy Paschal Donohoe

Yes, from my perspective and certainly from the perspective of the Minister of the Minister, Deputy O'Gorman. We have moved heaven and earth to make funding available to deal with the needs of those who come to our country seeking refuge. The scale of the Supplementary Estimate we brought in for the Department of Children, Equality, Disability, Integration and Youth for well over €1 billion, which was the largest Supplementary Estimate, shows my commitment and that of the Government to making funding available. The issue that necessitated the decision in regard to changing payments is the availability of accommodation not the availability of money. We are not lacking in compassion. We are not lacking in our ability to find money. What we are lacking in is our ability to find accommodation quickly and this is despite the huge progress we have made in accommodating nearly 100,000 people up to this point in the space of 18 months.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

I call Deputy Boyd Barrett. His time has come.

Deputy Richard Boyd Barrett

I very much doubt it. We have had to have significant Supplementary Estimates for health for a good few years. The Minister could probably remind me of that number.

Deputy Paschal Donohoe

Yes, that is correct. There were Supplementary Estimates for health in six of the seven years between 2017 and 2023. The one year where it did not happen was during the pandemic. It should be state that during that period, there was a very big variance in the scale of the Supplementary Estimates. Outside of the Covid era and the post-Covid era, when it was above €1 billion, it varied between €195 million and a peak of €645 million. Therefore, while there have been Supplementary Estimates, the value of them has varied considerably year by year.

Deputy Richard Boyd Barrett

This year, it is just over €1 billion.

Deputy Paschal Donohoe

It is €1.04 billion.

Deputy Richard Boyd Barrett

That is a 4% increase on the initial allocation and the Minister said it was more or less the same last year.

Deputy Paschal Donohoe

That is correct. Last year, it was €1.39 billion, and this year, it is €1.04 billion.

Deputy Richard Boyd Barrett

Are we not fooling ourselves that the allocation we are making in the budget is simply inadequate? We must know that in advance.

Deputy Paschal Donohoe

I would respectfully say “No”. I would do so for two reasons. The first is that the budget process is not just about allocating to Departments on the basis of need, and it is also based on the availability of money and resources. We have to allocate money based on all of the different competing demands that are there. The second point is to reiterate the value of the last answer that I gave to the Deputy. In more normal times for our health service, before the pandemic hit, there was a huge swing and variation in the value of the Supplementary Estimates that were needed. In some years, even though it is still a very large amount of money, it was between €195 million and €380 million, which is considerably smaller in value than where we are now. From my perspective, if we give a commitment that additional billions of euro are available outside of the supplementary process and the normal budgetary process, then we do so at the expense of trying to do more work on how we are spending this money and the governance arrangements.

Deputy Richard Boyd Barrett

What the Minister is kind of saying is that he is giving the minimum allocation that he can possibly give in order to put downward pressure on what the Minister will spend, knowing quite well that he is going to have to give a supplementary. That is what it sounds like to me. I take the point about the external exceptional circumstances in terms of the presence of a large number of Ukrainian people fleeing a war, which they and everybody else hope will be a temporary thing, and that the war will end and many of them will want to go home, and so on. On the Covid issue, I do not quite understand how that is still hanging over for 2023. Pretty much every health worker will say that we are massively understaffed and under-resourced, that we are stretched to the limit and if we do not get a Supplementary Estimate, the whole thing is going to grind to a halt. If what we are actually being told is that a Supplementary Estimate of a big magnitude is required, we are kind of just fooling ourselves in order to keep downward pressure on spending in the health service, and that is coming at the expense of an honest recognition of what is actually required by the health service in order to make it function as a quality service, with all the staffing and resources that it needs.

Deputy Paschal Donohoe

I disagree. The Deputy has to look at what we are doing with our health budgets beyond what happens in any given year. If he looks at where we have been since 2019, the figures are worth repeating. Excluding and stripping out the value of disability services, because they have now been moved out of the Department of Health to the Department of Children-----

Deputy Richard Boyd Barrett

I want to ask the Minister about that.

Deputy Paschal Donohoe

No problem. The increase in cash terms is €7.4 billion. That is a very significant increase in the funding that was made available to our health services over a number of years, and it was made available to them because they need that. If we look at where matters stand in terms of healthcare staff and the number of people who work there, we now have 22,000 more people working in our health services than we had in recent years. I know the allegation that is sometimes made about it being managerial staff or those who are working in administration, although, God knows, they are also needed. It is not that; it is 6,700 more nurses and doctors, 3,100 more healthcare professionals and 2,500 more doctors and dentists. We have built over 1,000 more hospital beds and increased our ICU capacity by a quarter. To take where we are now versus where we were during the previous Government, when I was also Minister with responsibility for public expenditure, there has been a shift change in our recruitment success in the health service and in its capacity, and the funding story for health is very different.

Deputy Richard Boyd Barrett

I get the point. Can I-----

Deputy Paschal Donohoe

The majority, though not all, of the funding that health got during the pandemic has been kept because we realise the healthcare environment has changed because of the pandemic.

I know the Deputy wishes to come in again. I will make one last quick point with regard to shocks and how things can change. One thing that I acknowledge is different to what we thought 2023 would look like is that there has been an amount of healthcare need that may have been suppressed during the pandemic, and that has confronted our hospitals in a way we did not anticipate. We are seeing our hospitals, in particular, busier after the pandemic than I forecast would happen.

Deputy Richard Boyd Barrett

I take some of the points the Minister is making. Due to a family member being ill for some time, I have had occasion to go into one of our major hospitals every week, at least once a week, for about the past year. I can tell the Minister that the story I hear every week is the same, namely, understaffing, lack of resources, not enough people on the wards and, in some cases, outright chaos, despite the best efforts of healthcare workers. Let us not forget that some of the additional demands that necessitate the increases the Minister is talking about, setting aside the exceptions, which I accept exist, are caused by the fact we have an older population. This puts ever-growing pressure on the health service and it is just something that we have to factor in as being necessary. In addition, after Covid, we have learned that we need better health services and we need buffers. We cannot be operating at near maximum capacity, which we were going into the pandemic, but we are a long way from having the sort of capacity buffers that we need if we were to hit something else. I put that point to the Minister.

All of the healthcare workers say the issue is staff. Of course, one of the major difficulties in recruiting staff into the health service, and we could say the same about education and a whole number of key areas where there are deficits, is the cost of housing, which means young people are leaving.

I was in London a couple of times recently and I was shocked to meet young people in the way we used to in the late 1980s. It is the first time I have seen it in a decade. Loads of young Irish people are living in London, having left because they cannot afford to live here. Almost all of them are qualified in various things, with trades and university degrees. They are all living in London saying they do not really want to be there but they felt they had no choice because it is cheaper. It is telling us something if they think London is cheaper than here to find a place to live.

We have a problem that we have to solve and a large part of that is the provision of affordable accommodation. One thing the Minister should be doing with the additional money is making even more ambitious use of it to build up the public and affordable housing stock to keep here the people we desperately need for our public services. They are draining out. The more pressure that is put on them, such as the temporary recruitment moratorium, the more of them will leave. One of the things being said by the people out on the protest today was that if this continues more of them will leave. This is against a massively understaffed situation already.

Disability activists will protest outside Leinster House tomorrow. There is a new coalition of disability groups. As the Minister may know, the UN international day for persons with disabilities was on Sunday. People with disabilities and disability advocates are really annoyed that the Government is banging on about the UNCRPD and the obligations we all have under it while not wanting to ratify the optional protocol. More to the point of what we are speaking about here, disability is hived off as a minority thing to a particular Department rather than being across the board, which is really what the UNCRPD should be. When we speak about additional expenditure for the Department of disability and integration, because disability has moved there from the Department of Health, surely what we need is money across every Department to ensure we are actually capable of giving equality in every single facet of life and have the resources capable of doing this.

I will give a local example from my area. I received a phone call from a wheelchair user who is a big disability activist to speak about an occupational therapy service in the local health centre. People who need their wheelchair serviced or a replacement wheelchair had one hour each day, five days a week, when they could phone somebody and an occupational therapist would be at the other end of the phone to sort out getting the wheelchair serviced. Recently, this was cut back to three days a week. It is now available on Mondays, Wednesdays and Fridays instead of every day, Monday to Friday. People are raging about this and rightly so. If they do not have their wheelchairs it creates serious problems, as does not getting them serviced when needed. The point is they do not have the occupational therapists they need to provide this service. This is an indicator of what they are saying about the lack of disability funding resources and disability-related staffing. In this case it is local and linked to the council and the Department of Health. I have banged on too much but the Minister gets my points.

Deputy Paschal Donohoe

I do indeed and I will make two quick points before we go to the vote. I travel to London a bit and I am aware of the strong Irish community that is there. I lived in London myself for many years. I would be very surprised if those living in the heart of London were finding Dublin more expensive, I have to say. I would be very surprised, given the size and the cost of Dublin itself. I take what the Deputy says in good faith because I know he would not say it unless somebody had said it to him, and a group of people did.

With regard to where we are with our health services and recruitment, we are still in a situation where, particularly over the past year, the HSE recruited more people than it had the budget for. This is at odds with the reality the Deputy is pointing to. As I said in answering an earlier question from the Deputy, we have employed more than 20,000 more people in the health services in recent years. The fact we have been successful in recruiting so many nurses and doctors in particular does point, I would argue, to the fact that the pay and terms offered to them compare well with what is available.

With regard to disability, I entirely reject the view that it is seen as somewhat of a minority responsibility of any Department, for no other reason than the fact that the budget for disability services for this year stands at €2.6 billion. This is a significant budget to meet the very important needs of our citizens with disabilities. All of this being said, I am still aware of the reality because I experience it in my constituency. These very large figures make some services available to our citizens with disabilities that they really value but I see myself that other services they need are not available in the way they and I would want. I can only acknowledge this reality.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

We have the voting block in the Dáil now. I presume we will come back afterwards. Is that agreed? Agreed.

Sitting suspended at 6:27 p.m. and resumed at 7.28 p.m.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

We are back in public session. Deputy Boyd Barrett was in full flight asking questions when we suspended. We did not intend to stay away for that long. It was an indistinct vote. Anyway, we will proceed. The Minister was in possession when we suspended.

Deputy Paschal Donohoe

I am grand. I think I was just concluding my response to Deputy Boyd Barrett, so I am all done.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

Okay. I call Deputy Cullinane.

Deputy David Cullinane

Go raibh maith agat. On what basis is a decision made about how existing levels of service, ELS, are calculated for any Department and what is this made up of, generally?

Deputy Paschal Donohoe

It is based on advice I get from my officials where we look at the funding made available to ELS in the previous year. Then there is our expectation and analysis regarding how this has changed. The main components we would look at in this context are where we are with demographics and what the demand for services will be. The key items we would look at for several of our larger Departments include where we are with population and any changes that have occurred in this regard. This would not just be the size of the population but also where we are with regard to demography.

We would then look at any new policy decisions that have been made either during the year or in the previous year and if there is a full-year cost for those. We would also then look at where we are with public pay, recruitment and overall pay policy.

Deputy David Cullinane

The head of the Department of Health, Mr. Robert Watt, appeared before the Joint Committee on Health and said that the existing level of spending, ELS, for 2023 and 2024 was underfunded. We know that for 2023, the health service ran a deficit of approximately €1.5 billion. The cash deficit was approximately €1.1 billion but taking accruals into account, the head of the HSE said the deficit was €1.5 billion. The HSE has put that down to a number of factors, including additional demand and higher inflation. The HSE also says that the ELS was underfunded at the start of 2023. It was much stronger in its criticism of the funding for the ELS for 2024 and what was in budget 2024.

I received a number of documents in response to a freedom of information, FOI, request. They are briefing documents that were prepared for the Minister for bilateral meetings that took place with the Minister for Health and officials from the Department. One is dated 6 October, which I think was the second meeting. There was a meeting on 3 October and another on 6 October. The briefing note states that the Department's assessment was that 3.5% was appropriate for the health Vote. The Minister's briefing note reflects his Department's assessment that 3.5% was appropriate for the health Vote and any increase beyond that limit would impact the limited funding available to address a small number of new developments. The problem is that the ELS is not meant to be contingent on what funding is available for new developments. It is meant to be scientific. It is meant to consider inflation, carryover measures and demographics. The figure is the figure. How did we arrive at a situation where the head of the HSE, the head of the Department of Health and the Minister for Health are clear in their analysis that what was needed for the ELS was in the region of at least €2 billion and yet what was provided was €707 million? How could there be such a variance between the two positions?

Deputy Paschal Donohoe

That is a standard feature of the engagement we have on the level of the ELS. It is a standard feature. The change in the ELS that is made available to a Government Department is a core part of the budget negotiation process. It is no different from the engagement I have with any other Department. Many Departments, at the start of the process, make the case for a higher level of the ELS than they end up with at the end of the process. I am also aware of comments that were made by the Secretary General, Mr. Robert Watt, before the Oireachtas committee where he pointed out that the €22.5 billion that has been made available over cumulative budgets represents an unprecedented level of investment. That is also what he said at the conclusion of the process. There is always negotiation and debate on the level of the ELS. It happens with every Department, including the Department of Health.

Deputy David Cullinane

The Minister can put a spin on the situation but the reality of what is in the briefing notes prepared for him, which I presume he was asked to articulate to the head of the Department of Health and the Minister for Health, paints an entirely different picture. Perhaps the Minister will let me finish my point. It suggests this was not the normal cut and thrust of division that might take place in respect of the ELS. I am sure that does happen every year, but there was very serious pushback from the Department of Public Expenditure, National Development Plan Delivery and Reform on, for example, the levels of inflation. The briefing note presented to the Minister stated that the inflation figures presented by the Department of Health in its bid reflect a very poorly managed base. It goes on to say that the Department of Public Expenditure, National Development Plan Delivery and Reform does not accept the inflation figures. In fact, the Minister's own Secretary General said as much when he was before the Joint Committee on Finance. The head of the Department of Health said that inflation was running somewhere between 10% and 17%, depending on what one is looking at, and that applied to both pay and non-pay expenditure. He said inflation is, at a minimum, 10%. The Department of Public Expenditure, National Development Plan Delivery and Reform was pushing back strongly against that.

It also pushed back, and this makes no sense, against the deficit for this year. We were told the vast majority of the spending will recur next year but the Government has not provided for it. That means we are going into next year with a black hole and an absolute guarantee that there will be a substantial Supplementary Estimate next year. This was all published and is in the public domain. Another line in the briefing note further illustrates the point I am making. In respect of both the ELS and the overrun for 2023, the briefing note states, "To be very clear this would also amount to embedding mismanagement into the base after a period of record investment and failures in financial governance across the acute sector." The briefing note prepared for the Minister speaks to the failure of the HSE and the Department. It pushed back against the claims in respect of the inflation rate, which either is or is not 10%. It stated there is a fear of embedding mismanagement into the base. Another document states that the Department of Public Expenditure, National Development Plan Delivery and Reform's opening position for the Department of Health was €808 million. That was what the Department of Public Expenditure, National Development Plan Delivery, and Reform proposed for the Department of Health at the meeting on 3 October. It further states that the Department of Health should not be told that figure because it would understand it as a negotiation, which it was not.

I must put to the Minister that a picture is painted of a lack of trust between the Department of Public Expenditure, National Development Plan Delivery and Reform and the Department of Health. That is clear in every line of the two documents that were given to us. It also suggests that the decision to calculate the ELS was not based on any of the data the Minister was given by the Department of Health or the HSE.

Deputy Paschal Donohoe

The Deputy did the novel thing of asking me not to interrupt before I had even done so or considered doing so. He did something that was not novel by accusing me of putting spin on something when, of course, he is attempting to do that himself. If he ever has the opportunity to be involved in an Estimates process, and I hope he has so that he has the opportunity to reconcile his rhetoric with the reality of doing an Estimates process, he will see that the kind of briefing I received on the Department of Health and the issues it was raising were exactly the same as any other Estimates process I am involved in with other large-spending Departments.

If I look at the ELS and the different bids, and I am sure this information is contained in the documents to which the Deputy has access via an FOI request, the funding that the Department of Health sought from an ELS perspective declined. It went down. It started off at €2.4 billion and ended up at €1.74 billion. It decreased. It is an ongoing feature of the engagement we have at budget time that a big discussion takes place about the level of the ELS.

The Deputy is looking at the one figure within a particular budget he wants to look at but without locating the figure in the reality that we are spending €22.5 billion overall on our health service at the moment. That money is needed. That €22.5 billion is an increase of over €7 billion on where we have been in recent years. The Deputy is entirely entitled to make a point regarding differences on the ELS that run to many hundreds of millions of euro. We had a discussion and negotiation about that during the Estimates process. However, it is in the context of a budget of €22.5 billion. If the Deputy is ever involved in these kinds of discussions, and he may well be, he will get a briefing from his officials that will make a case for larger amounts of money. If he is ever dealing with a party colleague or another colleague who is doing the job I am now doing, that colleague will receive a briefing note contending that the amount of money the Deputy is seeking is not available. Over a number of weeks, we then try to reconcile those two positions. That was what happened.

Deputy David Cullinane

Well-----

Deputy Paschal Donohoe

Hold on. The Deputy did not allow me to interrupt him so I am going to ask for the same courtesy, though in my case I did not even speak. What we attempt to do over a number of weeks is to close the gap.

The Deputy made a point about the Supplementary Estimate. Of course I acknowledge that the funding needs and the funding challenge for the Department of Health was considerable. This has been an ongoing feature of health expenditure over a number of years. In other years, while Supplementary Estimates have been needed, we have been successful at other points at getting them down to a lower value while still meeting patient needs.

That is the challenge that awaits in 2024. It is a challenge that is harder now because of the post-pandemic demands we are facing but is one we are going to face into and do our best on.

Deputy David Cullinane

What you cannot do is challenge facts. I am entitled to my opinion and the Minister is entitled to his. Earlier, I raised what are legitimate concerns and issues about a perceived mistrust between his Department and the Department of Health and the language in these documents and then he has come back to say that this just the normal cut and thrust of the ELS process every year. That is not reality, given that the head of the HSE has been on an RTÉ radio programme saying that 2024 would be very challenging for the health service. There is a recruitment embargo in place, as the Minister knows, and he will have to build a deficit into the service plan and that will be guaranteed. This year the proof was in the pudding. We had a very substantial Supplementary Estimate and even though the Minister was warned about building that into the base, which he did not do, it is not recurring next year. That is a problem.

The Minister spoke about mismanagement of health funding. I will read from his own briefing note. These are not my words. These are words in a briefing note presented to the Minister. It state that the Department's position is that the very maximum affordable settlement for health is €808 million. The Minister knows that the Department of Health and the HSE have a completely different view, which they would say is based on science. They would say it is based on fact, on evidence and data. That is not to say that everything the HSE or the Department says is right but when you look at the huge gap between the two, there is a concern. The note goes on to say that at present, the Vote has not been given to the Department of Health, given the gap between both Departments, the lack of meaningful engagement on a revised bid and the risk that this will be used as a starting point for negotiation of a higher amount. It is quite critical of the Department. It also says that the Exchequer cannot be expected to address the 2023 overspend problem, which has been allowed to get out of control. Those are not my words. Those are the words of the briefing document done for the Minister stating that health spending is out of control.

On inflation, the note says the Minister does not accept the arguments on inflation. It actually says "inflation, if needed", which I am assuming was the prompt for the Minister to respond. I put it to the Minister again that there are very sharp differences between what should be factual positions. Either inflation is at 10% or it is not. When the head of the HSE was before the Oireachtas health committee after the budget, I asked him if he still stood by the assertion he made when he came before the committee before the budget that health inflation is at a minimum of 10% and in some areas up to 17%. He said he did. Yet ELS, as the Minister knows, is only 3.5%. The Minister's own briefing note says that his Department does not accept the information it has got from the Department of Health.

I may well be sitting across from here one day as Minister for Health, and I may not. If I am, I acknowledge there are difficult decisions to be made. I cannot envisage a circumstance where ELS is based on available funding, contrasting that with what might be available for new measures, as opposed to what is actually needed to stand still. That is what the Minister did. His Department advised him to provide ELS funding for next year that is a fraction of what is needed, and the result of that is a guaranteed Supplementary Estimate for 2024 and another big hole in the HSE's finances that will have to be filled in at some point. Maybe the Minister is waiting for the next Government to fill it in; I do not know. It is not a way to fund a health service.

Everything I have seen from all the briefing notes and from the commentary from the Department and the HSE shows that there is a lack of trust between the two Departments. That is beyond the normal cut and thrust of negotiations. I am not apportioning blame one way or another. I am saying that for the public, for the people who use our health services and for those of us who are trying to make sense of all this, it does not make sense. Either facts are facts or they are not. I have to put it to the Minister again that the level of ELS that has been funded for the health service next year will clearly not be enough. Let us see what happens. If I am wrong there will not be a need for a Supplementary Estimate in health next year. We will see this time next year who was right about that, as we did this year.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

Before the Minister answers I should point out, as I did previously at one of these meetings, that I am in the habit of putting in parliamentary questions immediately after the budget for as far back as I can remember, maybe 20 years, on the basis that every Department - some Departments to a greater extent than others - allegedly had insufficient funding and we had to have Supplementary Estimates, including some big ones from time to time. The fact of the matter is this: the Department requiring the funding should identify to a greater extent the full extent of the funding required. We have discussed this quite a number of occasions. There was reference at the last meeting to an email arriving in the relevant Department the day before the budget or on budget day. That is not the way it is supposed to work. I have had input into making requests of the Department of Finance in the past in a different capacity. That took place sometimes months beforehand but always many days beforehand. It does not follow that the Department requiring extra funding, or funding, should expect to say we will have a second look at this because it is not enough. It is never enough. The question is what is enough.

Deputy David Cullinane

Could I just make one point?

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

That will be determined-----

Deputy David Cullinane

I will make one final point and then leave the Minister to respond. I do not wish to come back in again.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

Let me finish.

Deputy David Cullinane

When the Cathaoirleach Gníomhach is finished.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

That is to be determined by the Department seeking the funding. I would strongly urge that that be done in a more methodical fashion in the future, or at any time, because it is important to know. The Department, be that the Department of Finance or the Department of public expenditure or whatever the case may be, needs to have time to deal with the overall budgetary situation as well. I do not agree with the Deputy. If I did, I would be telling him that too but I do not.

Deputy David Cullinane

Let us look at the facts. I will make one final contribution-----

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

The facts as opposed to fiction. It is not always the same.

Deputy David Cullinane

-----and I will let the Minister respond. Quarterly meetings take place between officials in the Department of Health and the Department of public expenditure and reform. Two meetings took place on 3 October and 6 October. The Ministers for Health and public expenditure were present, as were officials. Bids were presented by the Department of Health, which come from the HSE. The HSE is not involved in that process. It is the Department that does the negotiations. In all of the commentary and in the briefing notes that were given, the view of the Minister's Department was that the Department of Health was coming in with too big an ask. It does not make sense from his Department's perspective. It does not agree with the inflation levels, even though the head of the HSE has stated that it is what they are. There is talk about mismanagement of the health budget, health funding being out of control and not giving the figures because it might then become a negotiation. None of that to me sounds like two Departments that are trying to come up with the right figure. It just does not sit with me.

The Minister has said the Department needs to provide information. Of course the Department would have provided that. There were two meetings. I make this final point and let the Minister respond. I am sure all of those issues I am raising around inflation, increased demand, the levels of ELS were presented by the Department and the Minister for Health. I am sure the Minister, Deputy Donohoe, is not going to tell me that none of that was done, no data was provided and no evidence was provided for any of the assertions made by the Department. If that was the case maybe the Minister might explain it to us. I agree with the Chair. Departments have a duty to put forward their case but the Department of Health did, at very high-level meetings. It seems from the documentation we have seen, that that level of mistrust was very clear. The does not bode well for how our health services should be funded. I will leave it at that. I have made my point. I will let the Minister respond.

Deputy Paschal Donohoe

First, it is not up to the Deputy to decide if I am let respond or not. That is for the Chair. I would just make that very clear to him. I do not have to await his guidance as regards whether I come in or not. That is for Deputy Durkan.

Deputy David Cullinane

You are very defensive.

Deputy Paschal Donohoe

The Deputy is all too happy to interrupt when a point is made back to him.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

One voice. The Deputy has had a good innings.

Deputy Paschal Donohoe

It is not a defensive point at all to remind the Deputy he is not the Chair. I am more than happy to do it.

The Deputy made the point regarding facts and the need for facts. I am happy to lay out a few facts for the Deputy. It appears what he is trying to do is engender a sense of drama from documents that have already been shared with me, prepared for me and are already in the public arena. If the Deputy was in a position, which I am sure other spokespeople are, to have similar documents for other Government Departments he would see similar briefings to those prepared for me on many of the claims that come to me and negotiations I am involved in in other large spending Departments.

Looking at where we are overall and where we were in the Estimates process, at different points I had approximately €4 billion of funding that could be allocated in terms of spending decisions that had already been made, existing levels of service, ELSs, and new policy decisions. Twice that was being sought by other Government Departments. It is a normal feature of an Estimates procedure that I sit down with Ministers and they will look for many, many multiples of what is actually available to give them. That is the standard feature of the Estimates process and of the many difficult meetings I have with Ministers. That is just the fact of it.

The Deputy characterised that as evidence of mistrust and some kind of relationship that is particularly lacking in trust and full of conflict. The meetings we had with the Department of Health were difficult. They were difficult because the Department is dealing with important issues on its behalf and making the case for patients and it was doing its job. Reaching an outcome on this is a negotiation. That involved me challenging figures the Department brought to me and the Department challenging me and the Estimates and the offers I made available in order to reach an agreement. That is not distrust; it is just the negotiation process in the Estimates.

The point around the ELS and the agreement made regarding it has to be seen in the context of how big the overall health budget is at €22.4 billion. As for the Supplementary Estimate that may be needed next year I made this point when dealing with questions from the Deputy's colleague, Deputy Patricia Ryan. I cannot give a guarantee that no health supplementary budget will be needed for next year. I have never given a commitment that we can avoid that happening. It would be foolhardy to do so given how many have been needed in recent years. It is also the case that in other recent years we have been successful in keeping the Supplementary Estimate to a level that has not challenged the overall budget arithmetic too much and has still allowed us to meet patient needs. That is my aim, working with the Minister, Deputy Donnelly, for next year.

Deputy David Cullinane

Can I respond to that?

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

No. We have finished now. There is a very important issue coming up. I have not had anything to eat today and I hope to get to it before the House closes. I thank-----

Deputy David Cullinane

I was just going to say that people can see it for themselves in the Minister's briefing documents and make up their own minds. As I said-----

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

Will the Minister finalise this?

Deputy Paschal Donohoe

The great thing is that people will indeed make up their own minds and the facts are the facts as I have described the Estimates process.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

That concludes this session. I thank the Minister, Deputy Donohoe, and his staff for attending, the officials from this side of the House, and the committee members for their input. The meeting is adjourned until Wednesday, 13 December. We can go into battle once more.

The select committee adjourned at 7.54 p.m. until 5.30 p.m. on Wednesday, 13 December 2023.