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Dáil Éireann díospóireacht -
Tuesday, 5 Nov 1996

Vol. 471 No. 1

Céisteanna—Questions. Oral Answers. - Public Expenditure Levels.

Charlie McCreevy


16 Mr. McCreevy asked the Minister for Finance if the Government will meet the level set for public expenditure for the current year as set down in the programme A Government of Renewal; if not, the likely outturn for public expenditure levels for the current year; and if he will make a statement on the matter. [20325/96]

The policy agreement, A Government of Renewal, stated it was intended that the growth of current supply services spending will be constrained to an average annual rate of 2 per cent in real terms over 1996-97. It did not set a specific target for this year. The real increase in gross current supply services spending provided for in this year's budget was 2.7 per cent. In my statement on the publication of the end-September Exchequer returns, I indicated that the increase in nominal terms in non-capital supply services expenditure to the end of September was 5 per cent over the same period last year, but that the end year outturn was expected to be somewhat higher. A nominal increase of 5 per cent is equivalent to a real increase of just over 3 per cent.

The two biggest additions to the budget provision for current spending are for EU disallowances regarding the beef fines and the cost of measures to contain the effects of BSE. The first of these big additions to spending was out of the Government's control while the second is the result of an unforeseeable development almost completely due to events outside this country which no Irish Government could have controlled.

In the pre-budget White Paper on Receipts and Expenditure it was indicated that a provision was included towards meeting the cost of EU disallowances. A footnote stated that, should the EU fines be levied in 1996, the expenditure would fall on the current budget. The figure was not specified because the EU Commission had not reached a decision on the disallowances. The disallowances decided by the Commission, some £70 million, are £20 million higher than the budget provision; the full £70 million is an addition to the budget provision for current expenditure. It is a once off cost. In effect, the Government provided £50 million in nonprogramme outlays because it did not want to declare publicly what it thought the scale of the fines would be. The full amount of £70 million is an addition to the budget provision for current expenditure and it is a once off cost.

The BSE crisis has increased spending in two ways. First, intervention will cost an additional £20 million gross. Second, Garda pay and allowances for BSE related duties on the Border could cost up to £25 million. Both of these steps were essential to safeguard the beef industry.

In a limited number of cases, the Government decided to authorise additional spending where it felt this was essential. The anti-crime package is an example.

There are also pressures on health and social welfare spending. On health, the main pressure arises on demand-led schemes such as the community drugs schemes. The nature of these schemes is such that it is difficult to estimate costs accurately.

On social welfare, the main overrun relates to the payment of the Christmas bonus at an estimated additional cost of £38 million in gross spending. The falling trend in the live register will help to contain this cost. Additional PRSI buoyancy will ensure that net social welfare spending will come in on or about budget.

The percentage increase in net spending, and the consequential impact on the budget, will not be as great as that in gross spending because the extra costs on agriculture will be part funded by the EU, and PRSI receipts are very buoyant. In addition, it is expected there will be further offsetting savings on other Votes.

My Department's latest assessment is that these pressures could mean that gross current supply services spending may be slightly over £200 million more than the budget provision.

The only major public service pay elements of this £200 million arise from Garda BSE and anti-crime activities. Their cost amounts to about £30 million, or 15 per cent of the £200 million approximately. The EU disallowances, at £70 million, account for a further 35 per cent. The balance of about £100 million, or 50 per cent, will go on additional services to the public.

There are normally end-year savings. Taking account of these, my Department's best estimate is that the 1996 outturn should show an increase of just over 4 per cent in real terms. EU disallowances and BSE-related expenditure account for more than half of this at about £115 million.

I can assure the House that public expenditure is under control. There is no loss of determination to constrain spending where this is possible. The two biggest additions to my budget provision for current spending, the EU disallowances and the BSE measures, were exceptional and unavoidable.

As provided under Standing Orders, the two remaining Priority Questions may be taken as other questions.