I welcome the Minister of State and his officials. The purpose of this meeting is to consider the Finance Act 2004 (Section 91) (Deferred Surrender to the Central Fund) Order 2009. On 10 February the Dáil agreed a motion to the effect that the order be referred to this committee for its consideration and that we should report back not later than 3 March. I call on the Minister of State to make his opening statement.
Finance Act 2004 (Section 91) (Deferred Surrender to the Central Fund) Order 2009: Motion.
I am pleased to be back before a committee on which I had the honour to serve for six years.
We are happy to have provided the committee with extensive additional information on savings and carryover by Vote this year. This matter was raised last year by Deputy Bruton and the then Minister for Finance and current Taoiseach, Deputy Cowen, agreed to provide additional material in advance of the hearing. I hope this can help us to have a productive discussion on the draft order.
The ministerial order before the committee is a technical instrument, the purpose of which is to allow the Dáil to approve formally the expenditure by Departments and agencies in the current financial year of capital moneys carried over from the previous year. The capital carryover facility forms an integral part of the five-year rolling multi-annual capital envelopes introduced in 2004. The multi-annual system is designed to improve the efficiency and effectiveness of the management by Departments and agencies of capital programmes and projects. The carryover facility means that moneys which would have been lost to the capital programmes and projects concerned under the annual system of allocating capital can now be made available for spending on programme priorities in the subsequent year.
The introduction of the multi-annual capital investment system has been a major positive factor in the roll-out of the capital programme. Apart from ensuring that resources that would otherwise be lost are now made available for capital spend in the following year, the multi-annual system has provided greater medium-term financial security to Departments and implementing agencies. In turn, this has facilitated better medium-term planning of programmes and projects. The development is a key element in the objective of efficiently delivering the ambitious capital infrastructure programme contained in National Development Plan 2007-2013. The answer to the obvious question as to whether it is intended, in the current and difficult budgetary circumstances, to continue with the multi-annual system is an emphatic yes.
The Exchequer and Audit Departments Act 1866 generally requires the surrender of unspent Exchequer moneys to the Central Fund at the end of each financial year. However, section 91 of the Finance Act, 2004, which gives legal effect to capital carryover, allows the carryover of unspent Voted Exchequer capital to the following year of up to 10% of capital by Vote, by deferring this surrender requirement, subject to certain conditions. Among those conditions are that the amounts of capital carried over by Vote be specified in the annual Appropriation Act of the year from which the carryover is proposed. The actual decision in principle on the amounts of carryover by Vote is, therefore, determined in the Appropriation Act. The Dáil again has the opportunity to endorse the amounts in its decision on the Revised Estimates Volume, which shows the capital carryover amounts separately in the relevant Votes.
The carryover amounts provided for in the Appropriation Act are required to be confirmed in an order to be made by the Minister for Finance by 31 March of the following year after approval of the order by the Dáil to allow expenditure to take place. The order sets out the amounts by subhead in a manner consistent with the amount by Vote specified in the Appropriation Act. Capital carryover within a Vote does not have to be spent on the same subhead or programme where the saving occurred. It may be spent on a different programme depending on progress and priorities.
The 2009 draft order sets out the subheads or programmes under which Departments and agencies propose to spend in 2009 the capital carryover amounts specified by Vote in the Appropriation Act 2008. The total amount proposed in the draft order for 2009 is €128.453 million, which amounts to 1.4% of the 2008 provisional outturn. This compares to a capital carryover figure of €126.119 million, which amounts to 1.6% of the 2007 provisional outturn as published in the Revised Estimates Volume for 2008.
The total 2009 gross Exchequer capital provision allocated in the budget amounts to €8.2 billion. The capital carryover of €128.453 million will bring the total Exchequer capital available for spending in 2009 to over €8.3 billion. Members should note that the Government decision of 3 February reducing the capital allocation for 2009 by €300 million will be dealt with in the forthcoming Revised Estimates Volume.
The main priority areas for spending of the capital carryover of €128.453 million into 2009 as set out in the draft order are as follows: almost €78 million will be spent by the Department of Transport on road improvements and public transport; over €18 million will be spent by the Department of Enterprise, Trade and Employment for investment in enterprise, science, technology and county enterprise development; the Department of Communications, Energy and Natural Resources is allocating over €15 million for its ICT programme, multimedia developments and sustainable energy and energy research; and the Department of the Environment, Heritage and Local Government is proposing to allocate €6.3 million to the carbon fund.
Departments and agencies have delegated responsibility within the rolling multi-annual capital envelope framework to manage their capital programmes and projects. The availability of these capital carryover amounts in 2009 will assist them within this framework in tackling economic and social infrastructural priorities in their areas.
I commend the order to the select committee.
It is nice to see the Minister of State back before the committee.
The Minister of State said the answer to the obvious question was an emphatic "Yes". Given the turmoil, are there any absolute figures?
The carryover arises. It is not something that can be estimated in advance or at least until close to the year end. Obviously we have precise figures for the carryover into this year and the carryover from 2007 into 2008 and they are contained in my statement. What we will carry over at the end of the current year into 2010, by definition I could not possibly give the Deputy an answer. The experience of the past two years was that it was somewhere between 1.4% and 1.6% of the total capital allocation. The ceiling is 5% but particularly in a capital area, spending is reasonably precise and the 5% limit has not needed to be used in the past two years.
Before Deputy O'Donnell begins, I believe the decision to change from the old system to allow the capital carryover is a wise one. We all know that under the old system in the last month of the year there was a mad rush to get rid of money on what were often dubious, not fully thought-out, although not illegal projects. On the other hand, projects that were not processed and not able to be completed were forced to look for new funding in the new year and this did not make good sense. It has been a wise decision and is working well in some areas.
As a former public servant I can remember the old system in operation back over 30 years, when there was an incentive for Departments to find some way, any way, to spend allocation in case the Department of Finance might get the impression that they did not really need all the money they were being allocated and that this might somehow reduce. This was in the days when the budget and Estimates were in January or February or even sometimes March of the following year.
This might go back to my experience in the Taoiseach's office in the years when there was a substantial surplus emerging. This sometimes gave the opportunity to bring forward valuable worthwhile and well thought out projects without disturbing the budgetary arithmetic and to be able to proceed with them. Overall, this is a good system and its validity is not affected by the budgetary situation in which we find ourselves.
Is it correct that the Government is not restricted to spending the under-expenditure in the previous year in the same section in the following year and that it can be reallocated within the Department?
Yes, within the Department.
The committee is getting a report which is nearly two months after the end of the budget year. Will it be possible in future years to bring in a progress report on capital projects on the capital budget during the year, maybe once a quarter? There is underspending of €128 million and we are seeing this two months after the end of the year. I ask for the Minister of State's comments. I ask the Minister of State to provide proper progress reports on a quarterly basis from now on and for each Department. I refer to subhead D2, Department of Transport which showed underspending of nearly €15 million in respect of regional airports and I ask the Minister of State to elaborate. Under the Department of Enterprise, Trade and Employment, there appears to be underspending of €20 million on IDA grants to industry and I ask for his comments.
Monthly profiles of capital expenditure are published and it is possible to follow the progress. It is also possible to put down questions to individual Ministers with regard to particular capital projects. This order is being brought forward and it has to be done by 31 March 2009 but this is only February. We are not doing it with too much delay.
I think the Minister of State will accept the point that it is two months into the year and capital is a scarce resource. We are approving the carry-forward. Would it not make sense to do this on a quarterly basis or even on a six-monthly basis, bring this report before the House and give an indication of each individual project in the overall scheme of things?
These are matters for the Minister concerned and it would be for the Minister to make any decision on any change in the current system. The Deputy's views can be conveyed to the Minister. I do not wish to do the Deputy an injustice but I wonder if there is a hint or undertow in what he says that if there is underspending of an amount of money does it mean there is loose change for other projects. I may be doing the Deputy an injustice. In the vast majority of cases the underspending is merely a mild deferral and it is not that the money is not needed and will not be spent——
I am making a very general point. Taxes are now a scarce resource and we must ensure they are spent in the most efficient fashion possible. It would strike me, purely from the point of view of analysis that such a progress report would be brought.
I understand that capital expenditure is reported and published quarterly, including carryover against profile.
It is published quarterly? Is it brought before the committee?
I suppose it would be for the committee to request it to be brought forward.
I suggest the Chairman could take this on board.
Capital expenditure at 5.3% of GNP is the highest in the EU 15 member states and is a considerable achievement in current circumstances——
All the more reason to get value for money.
Absolutely. The fall in construction prices should enable us to get better value for money. From time to time there is discussion in the context of the present economic background of the need for stimulus. The capital programme and the national development plan are part of this stimulus which we are imparting to the economy. Obviously there are very severe overall constraints.
The Deputy asked about regional airports. I ask him to remind me of the question.
The question related to an underspend of nearly €15 million.
I am very supportive of regional airports and of the Government commitment to them. I was pleased to see an announcement by the Minister yesterday that the travel tax would not apply to airports with fewer than 50,000 passengers departing from them each year.
I saw that, but it is regrettable it did not extend to Shannon Airport.
I gather the regional airport savings arose from the slow submission of claims earlier in the year and the decision taken in July 2008 following the Government review of public expenditure to confine payments to then contractual commitments in order to achieve savings.
I have another two questions for the Minister of State. Subhead C2, IDA Ireland grants to industry and science and technology programmes were underspent by €20 million and €18.5 million, respectively.
I am sorry, I have a voluminous brief. This would be the same explanation as the Deputy would have received in any year for the past 30 years, which is it is a demand-led process. It is a question of the slow uptake of grants by companies. In my experience of studying books of Estimates in the past 20 or 30 years, the degree of uptake during the year by IDA Ireland is particularly hard to estimate accurately in advance.
The Deputy asked about the science and technology programmes. Again the explanation is simply a lower than expected demand for the schemes. I share the sense, which is implicit in the Deputy's question, that this is an area that is very important for our future development.
It needs more attention. It is important for job creation.
Would I be right in saying that the variance in IDA Ireland grants to industry does not imply that there has not been foreign direct investment and grants in 2008? I understand there was more foreign direct investment than in previous years. Is it a time lag issue?
Some €75 million was spent on IDA Ireland grants to industry. Despite all the announcements of closures, partial lay-offs and shortened working weeks, there is still a flow of investment into the country. The country still has many advantages compared with other locations. Proportionately we are still well ahead of other countries, discounting for population obviously.
I will read out a note relevant to the Deputy's other question about research and development. It has a mix of short and longer-term returns. Science Foundation Ireland has been tasked with building high quality value-added research to build new competitive advantage. It currently interacts with more than 300 companies. Some 103 companies, both multinationals and SMEs, were engaged in cost-sharing research collaborations at the end of 2007. Since 2003 Science Foundation Ireland has established nine global scale centres for science and engineering technology in key strategic areas. Some 12 strategic research clusters have also been created to link scientists and engineers in partnerships across academia and in industry to address crucial research problems.
Can I take it that the select committee recommends that there should be no further debate on the motion by Dáil Éireann? Agreed. The clerk has circulated a draft report on the motion. Is the report agreed with the inclusion of the start and finishing times and the names of the members who contributed to the debate to be included? Agreed. Is it agreed that the report be laid before both Houses of the Oireachtas? Agreed