Thursday, 14 November 2019

Ceisteanna (7)

Barry Cowen


7. Deputy Barry Cowen asked the Minister for Public Expenditure and Reform his views on whether there has been an under-provision for demographics in 2020 in view of the fact the new demographics provision in the, Irish Government Economic and Evaluation Service, IGEES, analysis is €511 million; and if he will make a statement on the matter. [46824/19]

Amharc ar fhreagra

Freagraí ó Béal (10 píosaí cainte) (Ceist ar Public)

Is the Minister concerned that there has been an underprovision for demographic changes in 2020, given the new demographics provision in the IGEES analysis? The IGEES estimates that €511 million will be needed to cover demographic changes in 2020.

Each year, there are certain categories of expenditure that are treated as pre-committed for the purposes of the Estimates process. In shaping the allocation of resources in budget 2020, these included demographics, public service pay agreements, the carryover of certain budgetary measures and the capital expenditure increases under the national development plan. For 2020, that figure was €451 million, which was allocated in the pre-budget process.

During the Estimates process, a detailed discussion on all expenditure drivers, including demographics, takes place. The figure for 2021 will be €455 million, as it will be for 2022. These are outlined in an IGEES paper, which the Deputy touched on, that examined what these figures would be up to 2027. That paper was updated as part of the budget 2020 process.

We need to keep this matter under review. One of the issues that I am increasingly aware of is that we traditionally view demographics through the lens of the effect that ageing will have on society, both in terms of the number of births and longer lifespans. Now, however, the consequences of both factors are arising across more areas of Government expenditure than just, for example, social protection and education. That people are living for longer has consequences for health expenditure and the end-of-life supports that are required. When examining these matters, I want the next Dáil to assess those demographic figures in light of my experience in budget 2020.

I thank the Minister for his response. The IGEES report is interesting. I am conscious of the students in the Public Gallery who might be wondering why we are talking about demographics and what is important about them, but the Minister touched on the reason in his response. It is a question of how his Department and the Government are trying to consider the various age groups' impact on how the Government plans to spend its money in the years to come. There are some interesting facts. In 2016, the largest population age cohort was between 35 and 39 years. Pretty much all of them would have been working, fit and well. However, estimates for the 2031 population pyramid set the largest cohort at between 50 and 54 years.

Just six weeks ago when the Minister was preparing for the budget, he did not anticipate that there would be any significant change in his plans as they related to demographics. That change has turned out to be an underestimate of €60 million. He did not anticipate that change.

Did the Deputy say it was €60 million?

It was €75 million, actually. Will the Minister explain how that came about and how he was surprised, given his previous answer a month ago?

Indeed. Turning to the Deputy's point on the impact of demographics, the life expectancy of women in Ireland was 83.3 years in 2015 while it was 79.3 years for men. That was a large and welcome change compared with where we were a number of decades ago, but it all has consequences for the pre-commitments we need to make.

As to how this affects the budgetary process, between early September and early October, I have countless meetings with colleagues in government and the many civil servants who work with them. They make the case that our ability to fund day-to-day services needs to be increased.

In my experience, having done this over a number of years, when these figures are challenged or interrogated, there tends to be an increase in the provision that we need to make but it tends to be an awful lot lower than it is at the start of the budgetary process. It is fair to say that as I worked my way through budget 2020, I noted that the decrease was lower than had been the case in other budgets. We produced a forecast and update on what we believed the impact on demographics will be in the future on budget day and as we move through 2020 we must assess that paper and keep it in mind in the context of the preparation of next year's budget.

I thank the Minister for that response. The issue is that the cost of demographics in the budget was underestimated by €60 million. Where is the Minister going to get that money? How is he going to make it up? To those in the Public Gallery and watching at home, €60 million is not a small chunk of change. Given that it would employ 1,200 primary school teachers or build 240 social houses, it is quite an underestimate. Where is the Minister going to pluck that money from?

That €60 million is then used to hire teachers, to make sure that we have the right number of special needs assistants and so on. It is really important to make clear that money that is used for demographics is not dead money in any way. It is used to make sure, for example, that we have the right amount of money available to meet our commitments to those who are entitled to a State pension this year who did not have one previously. It is going to fund new services or entitlements for citizens who are moving into a different phase of their lives. To make the case that this is money that is not being used in a way that is productive in our economy or good for our society, which is not the case that Deputy Lahart is making, is wrong.

That is not the case I am making.

Of course it is not, which is why I said what I said. The money is being used in ways that are important. Where does the money come from? It comes from, for example, the €3.4 billion package that was announced on budget day, approximately €400 million of which was funded by additional taxation.