I apologise for the unavoidable absence of the Minister for Finance. The annual Appropriation Bill gives statutory effect to the Departmental Estimates for the supply services, non-capital and capital, including all Supplementary Estimates which were approved by the Dáil since the last Appropriation Act.
The 1995 Bill appropriates to the various services listed in the Schedule the sum of £10,398,104,797. This total amount comprises the original Estimates of £10.192 billion set out in the revised post-budget Book of Estimates for 1995; Supplementary Estimates totalling £204,208,000; and an Excess Vote of £1,788,797 for 1993 on the International Co-operation Vote. Following the normal practice, the Bill also approves the use of certain departmental receipts amounting to £963,222,880 as appropriations-in-aid.
When the Bill was debated in the Dáil, certain exaggerated claims were made by the Opposition parties about its implications for the increase in spending this year; they said it would be of the order of 12 or 13 per cent. The Minister for Finance set out the position on 1995 spending in his statement to the Dáil on 14 December in the course of the debate on this Bill. I will summarise and repeat the facts as he presented them.
The Department of Finance's best estimate of the outturn for 1995 current spending is £11.7 billion. This includes £140 million in respect of equal treatment payments which the Government decided to accelerate. When this amount is excluded the current spending outlook for 1995 shows an increase of 6.1 per cent over 1994 or 3.5 per cent in real terms. They are the facts and claims from the Opposition parties and reports in the media that the increase in spending this year will be in the region of 12 to 13 per cent are simply not true.
The Bill provides for the allocation of an additional £204 million to the original 1995 departmental Estimates. This money is required to enable Departments and their agencies implement their planned programmes of services and activities this year. This is a net expenditure figure which takes account of a £59 million shortfall in departmental receipts by way of appropriations-in-aid. When that shortfall is excluded the additional sum being allocated to gross departmental expenditure is £145 million, of which £115 million relates to gross non-capital spending. The Bill does not highlight savings which have arisen in various Departments.
The 1995 figure for gross current expenditure in the Appropriation Bill before the House is £10,080 million. However, this does not include the gross expenditure from the social insurance fund which is not voted by the Dáil. Taking this into account the gross current 1995 figure implicit in the Bill is £11,774 million. This is the figure for gross current expenditure which is shown in the Abridged Estimates Volume published last Monday. As I mentioned earlier the expected outturn is lower than this.
The Departments with the most significant Supplementary Estimates and the main factors giving rise to those additional allocations are as follows. An additional sum of £89.9 million is being provided to the Department of Health, of which £60 million relates to the establishment of a special fund for payments to people infected with hepatitis C. The balance of £29.9 million relates to additional funding requirements for demand led schemes, mainly drug refund schemes.
An additional sum of £45.4 million is provided to the Department of Education, the main component of which is in respect of a shortfall in appropriations-in-aid as a result of delays in receipt of transfers due from the European Social Fund. Additional provision is also required for recoupment to the vocational education committees in respect of payments made by them under the higher education grants scheme.
The Department of the Environment receives an additional sum of £23.1 million, mainly in respect of additional funding for the Government's restoration programme for non-national roads. The Department of Social Welfare is being provided with an additional sum of £19 million, mainly to cover the cost of the payment of a Christmas bonus to social welfare recipients.
As Senators will be aware, the Government has decided to use gross — as opposed to net — non-capital supply services expenditure as the measure of public spending in 1995. This has given rise to some comment in recent days. Gross current spending is used as it provides a more accurate and realistic measure of what the Government spends and is a more appropriate and valid basis on which effective overall control on public expenditure may be exercised.
In the annual Appropriation Act, which is the statutory authority for expenditure on supply services, the House approves first, the net amount needed for each service and second, the amount of cash receipts, known as appropriations-in-aid, which may be spent on the service. These two amounts taken together make up the gross amount of each Vote. A gross measure of public spending is a better measure of total Government spending. Net spending reflects receipts which partially fund spending. These include receipts of Government Departments by way of charges for services and certain EU transfers. A modest increase in net spending may mask significant increases in overall spending if there are compensating increases in departmental receipts.
The use of gross supply services spending as a measure of public spending is not a new concept. The annual Book of Estimates has, traditionally, provided details of departmental expenditure on a gross as well as a net basis. While the amounts voted by the Dáil and provided for in the Appropriation Bill are net amounts, Government accounting has always been on a gross basis, that is, receipts are not offset against payments. part II of each Vote sets out the gross provision sought by subhead. The subheads of a Vote are the headings under which the Department is required to account for expenditure and determine the items in the appropriation account. The gross approach facilitates the financial control of the Dáil and enables the Department of Finance to exercise control of expenditure.
This year's Bill covers an excess Vote relating to 1993. The excess of £1,788,797 arose from the over issue of funds to bilateral aid project accounts as a result of inadequacies in the system of financial control operated by the Department of Foreign Affairs which have now been rectified. Following established practice, the Committee of Public Accounts has examined this excess Vote and has no objection to it.
This year's Bill includes provision in section 3 for setting up a special account, to be funded from moneys provided by the Oireachtas by way of Supplementary Estimate on the Health Vote in 1995, to be used to pay awards on an ex gratia basis made by the tribunal appointed by the Minister for Health for the purpose of administering the scheme of compensation for victims of hepatitis C.
What the Government is doing, namely introducing a Supplementary Estimate to make available money to be paid into a fund created by the Appropriation Bill, had been decided on some time ago in the light of official and legal advice on accounting procedures and on the best way of supporting the work of the tribunal.
I repeat the assurance which the Minister for Finance gave to the Dáil last week, that there is no question of section 3 having been a last minute addition. The Appropriation Bill cannot be finalised until all Supplementary Estimates are known. For that reason, the Bill is always one of the last items published and brought before the Oireachtas each year. If the section had been an afterthought, the Supplementary Estimate would not have taken the format it did.
One of the precedents followed in drafting section 3 of the Appropriation Bill was the Air Companies (Amendment) Act, 1993, which created a similar fund to cover the payment of equity to Aer Lingus in the following year. If anyone cares to check the wording of these two Acts, it will be seen they are almost exactly the same.
Apart from authorising the Estimates and any Excess Votes, the Appropriation Bill also has another essential purpose. It provides a statutory basis for the calculation of the issues which the Minister for Finance is authorised, under the Central Fund (Permanent Provisions) Act, 1965, to make from the Exchequer towards meeting the cost of the following year's services before the Dáil has an opportunity to approve the Estimates for that year. Accordingly, the Appropriation Bill must be passed by both Houses of the Oireachtas before the end of the year to allow the provision of the 1965 Act to come into effect.
As we are approaching the end of the financial year, I take this opportunity to comment on the satisfactory performance of the economy over the last year and to look ahead to prospects for 1996.
The economy is performing strongly and it is now clear that economic growth this year will again be strong following last year's exceptional performance when GNP grew by some 7 per cent. The strong economic growth we are now experiencing is well balanced with both the domestic economy and exports contributing strongly to this growth. Improved confidence among consumers is reflecting itself in more buoyant consumption this year and last year, especially in areas such as new car purchases. Low nominal interest rates and the generally favourable demand conditions have resulted in stronger investment by businesses.
Our good competitive position and success in attracting investment helps us to gain market share with the result that our export performance continues to be exceptional. For instance, the latest figures show that in the first six months of the year, merchandise exports were one fifth higher than in the first half of 1994. Because growth has been both robust and well balanced, employment — which of course is the key measure of economic success — has responded strongly. The Department of Finance estimates that over the two year period 1994-95 employment has increased by over 80,000. In fact, the increase in employment in the year to mid-April last of 49,000 was the highest ever recorded in the labour force survey. This is a remarkable performance by any standard.
Inflation has remained extremely moderate at under 2.5 per cent over the last two years, below the average of our EU partners. Our balance of payments was in surplus to the tune of £2 billion last year and the expectations are that this will be exceeded this year.
This strong performance should continue into 1996. Confidence among consumers and investors remains high, interest rates are low and international economic prospects look generally good. The current growth phase should continue with another year of strong economic growth, albeit somewhat slower than the truly exceptional rates of this year and last. A further strong increase in employment is in prospect as growth is again expected to be well balanced.
As the House will be aware, the European Council in Madrid over the weekend took a number of very important decisions in relation to economic and monetary union. The first and most important of these decisions is that the Council confirmed unequivocally that stage three of European Monetary Union will commence on 1 January 1999. The Council also adopted a reference scenario on European Monetary Union setting out the steps to be taken in the transition to a single currency which, the scenario makes clear, will be completed by the middle of the year 2000. The Council also decided that the name of the new currency will be the Euro.
The decision on which member states fulfil the conditions for entry to European Monetary Union and the single currency will be taken as soon as possible in 1998. This decision will be based on 1997 outturns, although it will also have regard, of course, to the achievement by member states of a high degree of sustainable convergence. This means that the performance of member states in meeting the Treaty convergence criteria will assume an even greater importance from now on.
In recent years Ireland has made excellent progress on convergence. We have kept our general Government deficit below 3 per cent of GDP every year since and including 1989. We have reduced our debt-to-GDP ratio from over 116 per cent in 1986 to under 92 per cent in 1994 — a reduction of some 25 percentage points — and a further significant reduction is in prospect this year. Indeed, Ireland is the only EU member state which will have a lower debt-to-GDP ratio in 1995 than it had in 1991. The Government is determined to ensure that Ireland goes on meeting the criteria so that we will be fit and ready to join European Monetary Union when it commences in 1999. This Government will maintain the discipline necessary to ensure that we will be able to join European Monetary Union when it finally happens.