I move:
That Dáil Éireann commends the 2003 Estimates for Public Services (Abridged) published by the Minister for Finance on 14th November, 2002.
I am happy to have the opportunity to talk about the 2003 Abridged Estimates Volume. The media debate about the Estimates in recent days has been littered with misconceptions and inaccuracies. I want to take the opportunity today to correct some of those.
Some newspapers have referred to a planned increase in spending next year of 2% compared to a 20% increase this year. Neither of these figures is correct. It is true that last week's Abridged Estimates Volume provides for a 2% increase in spending. However, I made it clear last week that the AEV does not include any provision for social welfare rate increases, benchmarking or any other pay increases. I will deal with these issues on budget day. It is true that the end October Exchequer returns showed spending at that point was nearly 20% above spending in the corresponding period last year. However, the forecast outturn figures for 2002 which were included in last week's AEV show that, at this stage, the forecast outturn for net voted expenditure is only slightly above the Revised Estimates Volume provision. These are provisional figures and the end of year Exchequer returns will be available as usual in early January. However, my aim and expectation remains that spending this year will come in on, or close to, target.
I have an excellent track record overall in terms of ensuring that public spending each year is managed within the approved allocation for the year. Between 1997 and 2001, the average variation between the level of spending planned in the Revised Estimates Volume and the end-year outturn was less than 1%.
Another common misconception is that Ireland's share of spending relative to national income is much lower than that of other European Union countries and that our level of public service provision is correspondingly lower. This suggestion is based on cross-country comparisons which indicate, for example, that total general Government spending in Ireland is budgeted at about 35.5% of GDP for 2002, compared with an EU average of 47%. However, this comparison is misleading. Ireland's taxable capacity, which delivers the resources for public service provision, is essentially related to gross national product, not gross domestic product. Our GDP is about 20% higher than our GNP whereas there is no real difference between GDP and GNP in other EU member states.
In addition, a lot of expenditure is age related – pensions in particular. Other EU member states currently have a far less favourable demographic position than us. On average, 16% of other member states' populations are aged 65 or over whereas only 11% of our population is in this age group. This means, for example, that other EU member states have to spend much more to provide the same level of pensions and health services as us.
If one takes account of these factors, our spending ratio is much closer to the EU average and because I have managed our budgetary affairs prudently over the years, we now spend far less on debt service than others, about €1,000 less per household per annum.
Amid much talk of cutbacks, I want once again to remind this House of the scale of investment in our public services in recent years. I am proud that our growth rates since 1997 have allowed us to spend more on public services than has ever been possible in the past. In fact, we have had the highest rate of increase in public spending of all EU member states over that period. Spending on day to day public services here rose three times as fast as in the average EU member state between 1997 and 2002.
The Abridged Estimates provide for total gross expenditure next year of €36.7 billion, nearly double the amount spent in 1997. Current spending will be over €31 billion compared to €17 billion in 1997. Since I became Minister for Finance, funding for the health service has increased by €5.3 billion, education spending has increased by €2.4 billion and social welfare spending has increased by €4 billion. Capital investment next year will be over €5 billion compared with only €2 billion in 1997.
Taking account of the Estimates figures just published, and before any budget day additions, public expenditure will have increased at an average of about 13% per annum over the period 2001 to 2003. We are now operating from a very high spending base. This will allow us to continue to deliver high levels of public services.
This Government has consistently shared with the people the fruits of our economic success. We have used those resources to reform our tax system, invest in our public services, reduce our debt and establish the national pensions reserve fund to safeguard the pensions of this and future generations. Clearly, as economic and revenue growth moderates, we must bring our spending increases into line with tax revenue. The only other alternative would be higher taxation or higher borrowing. We built our economic success in recent years by putting sound taxation policies in place and this Government will not abandon those policies. The Government is also well aware that higher borrowing is not the answer – history has surely taught us that much.
The EU Stability and Growth Pact requires us to keep the general Government finances close to balance or in surplus and to take corrective action when there is an actual or expected divergence from this objective. We made it clear in An Agreed Programme for Government that we would respect this sovereign commitment. We must face reality. The pace of international economic activity continues to be sluggish amid uncertainty about the timing and the pace of any pick-up. Our economy is in good shape and in a good position to deal with the current slow down. We are determined to secure the maximum value for expenditure to further improve the quality of service provided to the public.
Government has to prioritise its spending and difficult choices are required. It is not possible to afford the same priority to each sector. It seems that everyone is prepared to ream off along list of high priority programmes but no one is willing to propose a reduction in even one specific spending programme. The Government has decided to continue to provide substantial funding in 2003 for health, social welfare, education and transport infrastructure. This has inevitably required a tighter approach in other areas. The Government did not make these difficult choices lightly. It is all too easy to ignore the realities. Government is about making choices. Constructive opposition might be expected to signal what areas of expenditure are of a lower priority.
Whatever problems exist in relation to the quality and quantity of our public services, money alone is clearly not the answer. If it were, we would have solved all our problems by now. Greater attention needs to be devoted to securing value for money through more effective control and management of public expenditure. It is a matter for each Minister ultimately to manage within his or her total allocation next year and to secure the best possible value for money from that allocation.
The success of any expenditure management system is crucially dependent upon a shared recognition by each Minister and his or her Secretary General of the need to ensure that appropriate financial control systems are in place and are functioning effectively. Ministers and their management advisory committees need to consider emerging expenditure trends on a regular basis and ensure, through this process, that budgets are being properly controlled and managed. Starting next year, I intend to publish the yearly spending profiles which are submitted to my Department at the start of the year. This will allow members of this House and commentators to make a more informed assessment of the pattern of spending as shown by the Exchequer returns which are issued by my Department shortly after the end of each month. I will continue to submit monthly expenditure management reports to Government on emerging spending and revenue trends.
Each Department's financial control system should include appropriate risk assessment measures and contingency provisions. I will ask that a review of spending patterns over the past five years be undertaken as part of the process of assessing the risk of future expenditure overruns on particular programmes. Depending on the outcome of the risk assessment measures, I expect each Minister to agree with his or her accounting officer a contingency amount within the 2003 allocation to be held back from specific allocation to cater for unforeseen pressures emerging as the year progresses.
As with any other spending programme, schemes where it is particularly difficult to forecast demand must be managed effectively. I am asking Ministers to ensure that Departments examine these schemes, assess the factors which influence the behaviour of both the clients of the scheme and those delivering the service, and prepare contingency options for changes in the rules governing such schemes or in the delivery mechanisms. Where evidence of higher than anticipated spending begins to emerge, Ministers must respond quickly by putting in place measures to bring spending into line with the approved allocation.
I am also introducing revised arrangements for managing capital spending. These will require each Department to provide details of all capital projects which it proposes to initiate during 2003 and which are planned for the following four years. Departments will also be required to provide an end of year report showing the actual expenditure outturn and outputs delivered.
The expenditure management arrangements should also provide incentives for Departments to improve efficiency and cost-effectiveness. As a general rule, where Departments secure savings as a result of efficiency measures or steps they have taken to curtail a programme, these savings should be available for other high priority programmes within the same Department. Similarly, proceeds arising from the disposal of surplus property should be available to finance high priority capital projects within the relevant Department.
Extra income arising from specific policy changes, particularly where these involve user-charging mechanisms which would improve the management and delivery of particular schemes or programmes, should be available to the relevant Department. I will develop these ideas further in consultation with my Cabinet colleagues.
While these control measures are very important in their own right they are also designed to encourage public service managers to seek out and exploit greater efficiencies. A number of initiatives are already in place which will help put the spotlight on value for money issues, including the management information framework, the expenditure review process and the forthcoming mid-term evaluation of the national development plan. I am aware that more needs to be done.
For a number of years now, a three year planning horizon has been in place for public expenditure. I want to develop this further to give greater certainty to Departments in relation to planned allocations over the medium term. I have already introduced a five year financial envelope in the public transport sector to facilitate greater planning and more effective management of expenditure.
My Department is currently considering whether a similar approach can be applied in other large capital spending areas. Ministers and Secretaries General are responsible for managing spending within their areas and I want to give them the maximum flexibility to do so effectively. Greater delegation must be coupled with greater accountability. The public has a right to see whether it is getting value for money. The Estimates provide an enormous amount of detail on the allocations across Votes and programme areas and are an essential tool in the Government's accountability to the Oireachtas. However, they tell us nothing about the outputs which are linked to those resources. Only when we can assess the outputs delivered, can we be in a position to assess whether we are getting real value for money from all of our public services.
This House can be confident this Government will protect and consolidate the economic progress achieved to date under our stewardship. We will pursue a sustainable budgetary policy, one that meets the needs of the current situation and that is capable of quickly restoring our capacity to provide for improved public services. We will take whatever steps are necessary to secure a sustainable financial position and evidence of this is clear in the 2003 Abridged Estimates. I commend this motion to the House.
