Oireachtas Joint and Select Committees

Wednesday, 26 April 2023

Committee on Budgetary Oversight

Stability Programme Update: Ministers for Finance, and Public Expenditure, National Development Plan Delivery and Reform

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The aftermath of the pandemic, the impact of the war in Ukraine, supply chain challenges and rising price pressures have all had such an impact on our public services, our households, our people and our businesses. We very much recognise these challenges and the Government has responded. Non-core spending allowed the Government to put in place measures towards mitigating these challenges. These include supports for our public services, in particular our health service, in dealing with the impact of Covid-19 throughout 2022; supports for our households, people and businesses to assist them in dealing with increased prices; and humanitarian supports to welcome and provide for those arriving to our shores from Ukraine. We have balanced the need to provide supports while, at the same time, ensuring budgetary policy remains sustainable. This is reflected in our quarter 1 spending. More than €400 million was spent on a range of supports, including accommodation, for people arriving from Ukraine.

The Government recognises the continued cost-of-living pressures faced by households. In February, we announced a further package of measures to be rolled out over the next few months. The package included €500 million of temporary and targeted expenditure measures, primarily related to social protection and education. Most of our most vulnerable will receive additional welfare payments this week to build on the supports provided in 2022. Where supports for these temporary challenges are still required, financial support continues to be provided though non-core expenditure and, in 2023, the overall expenditure ceiling for the year provides €5.2 billion in such non-core spending. However, it is important to note that non-core expenditure has decreased every year since 2020, as we removed the exceptional Covid supports when they were no longer needed. This has facilitated the return of our public finances to a surplus position and will continue to do so throughout 2023 and beyond.

In the medium term, we will look to deliver sustainable public finances. The Minister for Finance has described the surplus for this year and acknowledged the role of corporation tax receipts in delivering that surplus and, mindful of that, we have expenditure projections in the SPU that are based on a sustainable level of spending. These are also included in the model of the SPU on a technical, no policy change basis. The voted expenditure ceilings reflect the 5% growth rate anchor for core spending set out under the medium-term economic strategy. This strategy is based on aligning voted expenditure with the growth rate of our economy as measured by GNI* and aims to ensure a level of public spending that is sustainable, allowing us to provide consistent investment in delivering public services and infrastructure.

In setting expenditure parameters, however, the Government is aware that our fiscal strategy also needs to adapt to the evolving nature of our economy and society. This flexibility was reflected in our decision to increase the growth rate of public expenditure above 5% for budget 2023 to take account of higher than anticipated inflation and resulting cost-of-living pressures. The summer economic statement provides the key anchor for budgetary policy each year.

Over the coming months I will further consider our budgetary position, in collaboration with the Minister for Finance, in advance of the 2023 summer economic statement, which will then set out the expenditure parameters for budget 2024, taking into account the latest data available.

The careful management of our public finances, while responding to significant external challenges, has supported our economy in remaining resilient. We have to plan for the future and invest in digitalisation, decarbonisation and the future quality of life of those we serve. In the coming months I, with the Minister, Deputy McGrath, will consider how best to use budget 2024 to achieve those priorities.