Vol. 503 No. 3
60 Mr. McDowell asked the Minister for Finance the reason he has abandoned his previously stated policy of announcing financial envelopes for spending Votes at the end of March; and if he will make a statement on the matter. [10224/99]
The reason I did not announce financial envelopes by the end of the first quarter of this year, as I had indicated I would do in my budget speech, was set out in my statement on publication of the end-March Exchequer returns.
As I explained in the statement, my Department has carried out a considerable amount of work on financial envelopes. I decided to postpone seeking Government decisions on financial envelopes at this time because it became clear, as the detailed work on developing the envelopes was proceeding in my Department, that seeking Government agreement to the envelopes at this time would not be appropriate. The forthcoming negotiations on the national development plan and, subsequently, on the national agreement to succeed Partnership 2000 will almost certainly require revision of financial envelopes decided now.
I decided, in the circumstances, that the final phase of the multi-annual budgeting system will be introduced with effect from the year 2000. It is my intention that, under this new timetable, financial envelopes will be decided by the Government for the years 2001 and 2002 in first quarter of 2000.
There is no question of the move to the final phase of multi-annual budgeting being abandoned. The Government is committed to introducing the multi-annual system involving decisions on resource allocation for three years. My decision to defer announcement of the financial envelopes until 2000 was based on purely practical considerations related to the efficient organisation of Government work. It would not have made sense to engage the Government in a time consuming consideration of financial envelopes in the knowledge that decisions made would have to be revised to take account of the national development plan and the national agreement to succeed Partnership 2000.
I put it to the Minister that what he has just told us is a load of nonsense. His Department has been engaged in negotiation with individual Departments for at least a year in relation to financial envelopes. Surely he will agree that the national plan is not a surprise, nor is the renegotiation of Partnership 2000. Is this not, in effect, the end of multi-annual budgeting as far as this Government is concerned? Does it not mean, in effect, gross failure in terms of any introduction of SMI and the end of any serious effort to control public spending?
Deputy McDowell will not be surprised that I do not agree with any of the suggestions put forward by him. A great deal of time has been spent in the Department of Finance developing this whole process. Before my last budget I gave much consideration to finalising it. That would have involved an exercise in which I could have produced figures but they may not have meant a great deal. I then decided we would revisit the matter in the first quarter of this year with a view to progressing it. For several years we have been engaged in developing the "no policy considerations" framework and contained in the figures for 2000 and 2001 are the costs on a "no policy change" basis. The financial envelopes will effectively decide particular Departments' Estimates for a number of years and that means getting involved in detailed Estimates negotiations. Considering that we will have to finalise the national development plan later this year – that will take up a great deal of time with individual Departments together with the Department of Finance – the overall framework will have to be developed further and, in addition, we will have to engage in discussions later this year on the successor to Partnership 2000. We will then be in a position to make a better estimate of the figures. It does not make practical sense to me, as a humble book-keeper, to produce financial envelopes that will be revised in a few months' time and again later in the year. Envelopes on that basis would not have any meaning; it would be a case of making projections and guessing what the outcome will be. That is not the intention behind the financial envelopes. The Department of Finance will negotiate with the relevant Government Department and, within that envelope, will work for the following number of years. Changes will then be made in line with Government policy. To have a meaningful idea of financial envelopes I decided to delay the process for the present time.
The Minister's response would make perfect sense if he were not also committed to containing Government spending within certain specified cash limits. The Minister has produced indicative figures, to use his own phrase, of what will happen over the next three years. He stated that what remains to be done with those figures is for the undetermined amount, which I understand is approximately £350 million for next year, to be allocated within individual Departments to reach the Government total intended cap of 4 per cent. What is the status now of those indicative figures published on budget day?
The Deputy must remember that the financial envelopes will not just relate to current spending. The 4 per cent limit imposed relates to net current spending. The financial envelope will also involve current and capital spending. For the reason I have just outlined, therefore, the more pragmatic approach to take is to await further development so that we can put realistic financial envelopes in place. Lest there be any doubt about it, negotiating financial envelopes will not be an easy task, particularly the first group of financial envelopes. Whatever difficulties arise, it is my intention that when the financial envelopes are in place they will remain in place. This will not be just a signing off exercise on behalf of individual Departments which will then change them willy-nilly later in the year. The idea behind financial envelopes is that they will be adhered to, so it is better to take that approach than to adopt a laissez-faire attitude which would not mean very much.
I agree with the Minister in terms of the process although I may not agree in terms of the figures. Is it not also fair to say that the Minister's Department has been attempting to negotiate with individual spending Departments in particular for at least a year, and that in the Estimates circular last year the Minister asked Departments to indicate their intended spending for the next three years? Will he agree this marks a complete abandonment and failure of that policy?
The Deputy is correct that since early 1998, or perhaps before that, we have been engaged in this process – the Deputy has given a fair summary of what has occurred in that period. It is a difficult area but I intend to introduce financial envelopes and they will have the intended effect. The Deputy will have to wait and see what the proof of the pudding will be.
The Minister will forgive me if I do not hold my breath.
