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Dáil Éireann díospóireacht -
Wednesday, 28 Jun 1995

Vol. 455 No. 2

Ceisteanna—Questions. Oral Answers. - Public Expenditure.

Michael Ahern

Ceist:

14 Mr. M. Ahern asked the Minister for Finance the cutbacks that have been achieved in levels of public spending; the levels of cutbacks which have taken place in individual Government Departments; and if he will make a statement on the matter. [11849/95]

Matt Brennan

Ceist:

24 Mr. M. Brennan asked the Minister for Finance the impact, if any, the recent critical OECD report will have on Government spending. [10746/95]

Ivor Callely

Ceist:

27 Mr. Callely asked the Minister for Finance the measures that have been considered to assist the Government in addressing the unfavourable variance that exists in Government spending to date; and if he will make a statement on the matter. [11437/95]

Matt Brennan

Ceist:

29 Mr. M. Brennan asked the Minister for Finance if this Government intends introducing a mini-budget to compensate for the high growth in public expenditure. [10750/95]

Charlie McCreevy

Ceist:

35 Mr. McCreevy asked the Minister for Finance when he will announce the necessary and essential cutbacks in the finances of the economy which have been achieved in view of the urgency of the situation and particularly in view of the recent OECD survey. [11847/95]

Bertie Ahern

Ceist:

55 Mr. B. Ahern asked the Minister for Finance the reason he waited until the highly critical OECD report before he addressed the evident spiralling of public expenditure. [10747/95]

Michael P. Kitt

Ceist:

63 Mr. M. Kitt asked the Minister for Finance the plans, if any, he has to revise all or any estimates for individual Departments in view of the fact that the latest inflation figures indicate an annual inflation rate in excess of his budget estimate and in view of the fact that his 1995 budget was based on a projected inflation rate of 2.5 per cent; and if he will make a statement on the matter. [11851/95]

Bertie Ahern

Ceist:

64 Mr. B. Ahern asked the Minister for Finance if he will identify the necessary cuts in Government expenditure to ensure a 2 per cent increase in 1996 as pledged by the Government. [10753/95]

Ivor Callely

Ceist:

70 Mr. Callely asked the Minister for Finance the measures, if any, that have been considered to address Government spending to date; and if he will make a statement on the matter. [11680/95]

Batt O'Keeffe

Ceist:

92 Mr. B. O'Keeffe asked the Minister for Finance the anticipated level of public spending for 1995. [11189/95]

It is proposed to reply to Questions Nos. 14, 24, 27, 29, 35, 55, 63, 64, 70 and 92 together.

I wish to make clear at the outset that the interim decisions on public expenditure which the Government has recently taken are aimed at containing the growth in gross current supply services expenditure in 1996 within the 2 per cent real increase figure to which it committed itself in the programme, A Government of Renewal.

A review of spending trends carried out recently by my Department pointed to a risk that, based on a continuation of existing programmes and policies, gross departmental current spenting would grow next year at a rate slightly in excess of the 2 per cent real limit. Accordingly, in the interest of prudent budgetary management the Government decided on a measured and appropriate response at this point to an emerging unfavourable trend in order to avoid excessive dislocation of public services which would have been inevitable had the response been delayed. The interim measures which were announced on 8 June were as follows:——

— all Ministers are to identify measures to control public spending within their Departments. This will involve all Ministers reviewing their existing policies and expenditures with a view to maximising the benefits to be obtained within the Government's spending target.

— there will be no recruitment to posts paid for out of public funds which would have the effect of increasing the numbers of posts above that on 9 June, unless there is specific prior Government approval. All Ministers are to halt the process of recruitment for additional posts with effect from 9 June 1995, unless and until the Government decides that such recruitment may take place in particular areas.

Their primary purpose is to ensure that the Government's 2 per cent limit on real current spending next year will not be breached and that there is thus sufficient scope in next year's budget to make further progress in reducing taxes in favour of employment.

The impact of these decisions will be reflected in the detailed Departmental spending bids for 1996 which are now being drawn up. These estimates will be examined in detail by Ministers over the coming months and final figures for each Department and agency will be published in the 1996 Estimates volume.

Let me make one point absolutely clear. Public spending in 1995 is on target. There are no indications of the emergence of any significant underlying pressures driving spending off course. The Government is determined to achieve its target for 1995 of a 6.9 per cent nominal increase in gross non-capital supply services spending. The midyear Exchequer returns which will be available early next week should provide confirmation that we remain on course.

The inflation data for mid-May are not a cause of concern in so far as this year's Estimates are concerned. Underlying inflation, exclusive of the recent change in mortgage interest rates, actually declined in the quarter. I am confident that the average rate of price increase over 1995 as a whole will be close to my budget-day estimate of 2.5 per cent.

I assure the House that, in the light of the foregoing, there are no plans to introduce a mini-budget in 1995.

The prudent action which the Government has taken has resulted from a careful and timely examination of the outlook for expenditure in 1996. The Government commenced its examination well in advance of the publication of the recent OECD survey on the Irish economy. It is totally misleading to suggest that the Government decision to initiate action to control the emerging expenditure trends in 1996 was taken in direct response to the OECD survey. This is simply not true. Also, I reject allegations that the OECD survey is "highly critical". The survey, in fact, is very positive. I acknowledge that there are some criticisms but these are in general constructive, in that the concern of the OECD is to ensure that the Government's present successful policies are maintained. In this regard, I remind Deputies that the OECD's comments in relation to the growth in public expenditure relates to the growth in the recent past — not to the Government's plans to contain the real increase in current supply expenditure to 2 per cent per annum on average over the next two years.

This Government is taking positive and determined steps to ensure that the growth in public expenditure is kept firmly under control. We are committed to curbing the excessive growth in current Government spending which has emerged over the last five years. We are convinced that this positive action will yield significant benefits in terms of increasing the room for manoeuvre to improve the incentives for work through the tax and social welfare system, and in terms of keeping downward pressure on borrowing and thus on interest rates and inflation.

This disciplined approach will provide the resources to promote additional employment, reward work and reduce taxation.

We read recently that there was a certain Friday by which all Ministers were to have sent their proposed cutbacks to the Minister for Finance. Is the Minister in a position to announce, particularly in the light of the impending by-election, to which areas these apply?

The Deputy has been too long in this House and too long in Government not to realise that the replies which I have received have been substantial but, as is the tradition of the Department of Finance, not as satisfactory as we might wish. Onward discussions and negotiations are taking place. The replies have come in.

In the light of the need to control public expenditure will the Minister accept that the message from a conference which he was unable to attend recently but which was attended by people from the EMI, particularly in the light of Dr. Waigel's comments relating to the need to curb public expenditure, would lead one to believe that approaching the 60 per cent figure will not be enough and what they are now saying is that we should achieve the 60 per cent figure? Is the Minister's thinking in the context of public expenditure alerted to that and is that what he is now striving to achieve by 1999 when the kick-start of monetary union is proposed?

I certainly hold the view that we should be moving, particularly in a period of high growth and we are looking at positive growth in real terms of the order of 3 per cent after inflation, 2.5 per cent after inflation if you take the ESRI study, for example, for the next four or five years, towards getting our current budget into balance. It is an opportunity which previous political generations have not had and I think we should use that opportunity to get our current budget into balance, possibly into surplus. Because of the needs of the Irish economy, there will be a requirement to have a capital spend for some time in productive public infrastructure investment but in terms of current supply services for current account activity there is an opportunity and, therefore, an obligation for us to work towards a current budget balance.

What we do with the fruits of growth depends on what priorities Governments of the day, informed by the votes of this House and the electorate, want to do. Reducing the debt is clearly one of them because it releases resources for expenditure or for lowering taxation. There is another view that Government activity should have as a priority a policy that will stimulate economic growth. We certainly should be moving to reduce the debt as quickly as possible. One way of doing that and the way that has been chosen by this administration and by the previous administration is to ensure the highest rate of economic growth so that the debt to GDP ratio falls rapidly which is what has been happening.

Will the Minister agree that if one were to use the traditional net supply service spending figure, the growth in supply service spending this year would be close to 8 per cent rather than 6.9 per cent? Will he also agree it is strange that we should hear in this House of the particular measures that affect the Department of Justice but are not told of the general implications of the call by his Department on other Departments to identify opportunities to control public spending, what those other measures will be? Has the Minister asked each Department to specify a figure in respect of each Department, is there a target figure by which they are to control public spending next year? Are Departments free to choose the extent to which they are to identify these opportunities or have they been fixed with some percentage of departmental spending which must be cut back, in effect, in the process that is now unfolding?

To answer the Deputy's last question first the Departments have been given figures——

May we hear them?

They are publicly known. The figures are clearly contained in the Programme for Government. They must prepare Estimates on the basis of a real increase of no more than 2 per cent for 1996 on the basis of where we are now having regard to certain emerging trends in so far as we can discern them at this stage. We appear to be running at 2.7 per cent rather than 2 per cent, hence the reason for taking the 0.7 per cent corrective action. That is an adjustment in the process.

In relation to the Department of Justice the reason the decision to defer the Castlerea project was that they were about to go to a definitive stage in the contractual process and it was necessary to defer it at that time. Otherwise we would have engaged people in a contractual process that would have been difficult to unravel. That is the reason that decision was taken in isolation.

A substantial amount of overtime was paid in various Departments during the past year. Overtime payments in the Department of Equality and Law Reform and in the State-sponsored bodies under its aegis amounted to £23.5 million, it amounted to £23 million in the Department of Health and the State-sponsored bodies under its aegis and to more than £6.75 million in the Department of Agriculture, Food and Forestry and the State-sponsored bodies under its aegis. Regarding the control the Minister is insisting on in terms of cutbacks, will his emphasis be to maintain employment at its present level and to ensure that overtime will not be abused? Is the level of overtime kept under constant review?

I have not had notice of the precise nature of the question and I am not familiar with those overtime figures, but they appear substantial. It is an area that must be examined. We are concerned that a chief executive, be it the secretary of a Government Department or an agency under a Government Department like a health board, would manage the delivery of the services with which he is charged statutorily to supply in as effective and efficient a way as possible to maintain the quality of the service. The Deputy used the phrase "excessive overtime". If overtime as a percentage of wage costs is excessive, it is time to examine the way that labour force is being utilised, the staffing level of that organisation or if there is an agreement, albeit informal, between management and staff to divvy up the work among a smaller group of people to ensure a higher level of remuneration when more employment could be created to supply the same service. Without having specific details I hesitate to comment on the overtime figures to which the Deputy referred. I would not like to think that collusion resulted in even temporary jobs, which could have been filled not being filled and the overtime being shared among a smaller group of people. That would be against my view on how employment opportunities should be opened up and shared within our community.

The across the board use of a scalpel in various Departments when cutbacks must be achieved is not the correct approach, but it seems to have been adopted by successive Governments and Ministers for Finance in seeking to achieve spending levels. Such an approach in a Department which starts from a high base and has more fat may affect worthwhile initiatives in other Departments. Perhaps the Minister should use a more selective approach in terms of achieving spending levels. In this era of openness, transparency and accountability, will the Minister announce details of any midyear adjustments — similar to those made by Governments in the past regarding spending plans — before the Dáil goes into recess next week.

I thank the Deputy for his observation on across the board approaches and I agree with him. Those are corrective measures we are requiring Departments to take. The 1996 Estimates do not take account of the mid-year Exchequer returns which will be available in a few days and will enable us to fine tune our figures. We are not talking about a mini budget which would result in downward adjustments in terms of proposals for 1995. There may be adjustments regarding the commencement of various types of activities and programmes and I will make all that information available as soon as final decisions are made.

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