Dáil Éireann díospóireacht -
Thursday, 21 Apr 1994

Vol. 441 No. 7

Ceisteanna—Questions. Oral Answers. - Government Current Expenditure.

Michael McDowell

Ceist:

9 Mr. M. McDowell asked the Minister for Finance, in respect of the out-turn for 1993 and the projections for 1994, the total value of Government current expenditure in respect of each of these years; the increase in value in money and percentage terms from one year to the next; the relevant or estimated rate of inflation in respect of the periods; and in relation to the total tax receipts and, within that, income tax receipts for the out-turn for the fiscal year 1993 and the estimates for such receipts for 1994, the amount that each of these receipts will have increased in money and percentage terms over the previous year.

Mr. B. Ahern

Taking current expenditure as the total of Central Fund Services plus the Revised Estimates Volume provision for Net Non-Capital Supply Services, the outturn for 1993 was £10,501 million and the provision for 1994 is £11,159 million — an increase of £658 million, or 6.3 per cent. That calculation, however, includes current supply services allocations of £192 million which are specifically related to the tax amnesty. If these allocations are excluded, the 1994 provision falls to £10,967 million — a year-on-year increase of £466 million, or 4.4 per cent.

The rate of increase in the consumer price index in 1993 was 1.5 per cent. My Department's projection of the CPI for 1994 remains at 2.5 per cent.

Allowing for the increased tax revenues directly associated with the £85 million Programme for Competitiveness and Work— related adjustment in public service pay—which was established subsequent to the budget — total Exchequer tax revenues in 1994, including the £230 million amnesty provision in the budget estimate, are projected to increase by £735 million or 7.6 per cent. Excluding the amnesty proceeds, overall taxes are projected to increase by £517 million or 5.3 per cent, of which income tax accounts for £85 million — a year-on-year increase of 2.3 per cent.

Mr. Yates

I know the Minister tried to freeze the figure of the Central Fund account, that the reduction in debt servicing costs is beneficial and that he would like to exclude the amnesty tax take but is he aware that it is accepted by macro economists that since 1990 spending in real terms has increased by one-quarter? In that context does he believe that this Government will be able to achieve the ESRI forecasts of boom and that if we are to enjoy its fruits we must get public expenditure down from 50 per cent of GNP to 35 per cent of GNP and reduce direct taxes on income from 23 per cent to 15 per cent of GNP. If we are to enjoy the prosperity of which the Minister speaks does he intend to follow it through by changing his policy on the growth of public spending?

Mr. B. Ahern

Deputy Yates knows that the ESRI also allows for modest growth in services.

Practically all the increase in public service spending in 1994 relates to pay and social services and £451 million of the net spending of £557 million will be spent in this area. That is where the difficulty arises. In most countries of the Community with the recession and zero or minus growth in the economy during a three year period, the cost of social services, and in our case, the cost of social welfare—I define social services as social welfare, education and health — has increased. In one year an additional 30,000 joined the dole queues and money must be provided for them. The shortfall in the finance of the health services caused a great deal of rancour in the House and we provided additional resources for them. The other Departments have contained their spending. Any increase in public expenditure is of concern to the Minister for Finance and I am doing all I can about it.

I do not believe we can totally commit ourselves to following tight fiscal policies regardless of what is happening in Europe. We certainly will keep finances as tight as we can. If the Deputy looks at the statistics for the 1994 projected EBR and the budget deficit across the Community, he will see that we are second lowest after Luxembourg. Our projected figure of 2.8 per cent compares favourably with the figures for most other countries, in Portugal it is 6.5 per cent; in the United Kingdom it is 6.3; and the European Union average is 5.7. We do not want to become a one item agenda Government with controls on public expenditure squeezing the life out of the services. We need to watch public expenditure and we have kept a far tighter rein on public expenditure than our partners.

I would have preferred if pay increases under the Programme for Competitiveness and Work were lower but they are less than in most other European countries. The projected rate of inflation for this year is 2.5 per cent and next year the increases in pay will be far lower. Pay levels and numbers in the public service have to be kept under control.

Deputy Yates will agree that he and I are probably the only people who believe in this. During the two day debate on the Finance Bill demands were made for an increase of £970 million in public expenditure and there was not a suggestion from anyone, including the Deputy, as to where we might cut back even though I continued to invite Members to make suggestions.

Mr. Yates

When I have the Minister's job I will do that.

Mr. B. Ahern

Unfortunately when the Deputy's colleagues held this position they did not do it either, they doubled it and the national debt doubled in the process.

Mr. Creed

They did not double it half fast enough for the Minister.

Mr. B. Ahern

I will let nobody lecture this Government on public expenditure. I assure Deputy Yates that we will continue to manage this economy better than most others.