Tuesday, 28 February 2006
Question 46: To ask the Minister for Finance, further to Exchequer returns for 2005, the reason for the very significant differences between the forecasts given on budget day for public spending and the Exchequer deficit; the way in which the Government apparently underspent in the region of €564 million in the final three weeks of 2005; and if he will make a statement on the matter. [8065/06]
Estimated end year total gross spending by Departments was approximately €45.1 billion in 2005, an increase of €3.9 billion or 9.5% over 2004. The end year outturn for gross spending by Departments was €225 million less than the original 2005 estimate adjusted to take account of certain Health Service Executive spending.
The increase in spending in 2005 over 2004 represented the costs of very significant improvements in public expenditure and I will mention just a few of these. The social welfare budget day package I announced in December 2004 cost in excess of €800 million, for instance, old age pensioners got an increase of €12 per week from January 2005. There was additional and better services in the education sector, where spending increased by €570 million or 9%, additional and better services in the health sector where the increase in spending was in excess of €1 billion and additional spending on ODA which went up by 15% over 2004.
These and other significant improvements in public expenditure are pitched across the spectrum of public services. I am satisfied that this was an appropriate increase. Equally, I am satisfied that the additional €1.4 billion being allocated to social welfare spending in 2006, the additional €1.3 billion in health spending and additional spending in many other areas is warranted and that it is appropriate for the Government to share the fruits of growth by reinvesting in the social and economic needs of the country.
As to variations in any given period between spending costs and outturns, these are nothing new. Estimates produced at any time for gross expenditure are dependent on the level of factors, such as take-up on demand-led schemes and the timing of bills received by suppliers and contractors. In addition, the level of receipts, which are reflected in net expenditure, cannot be predicted with certainty as they can be affected by timing of payments submitted by employers for PRSI and health contributions. Similar timing issues affect many other headings, such as European receipts. The simple fact is that if payments are received earlier than expected and if payments are delayed or demand for schemes lower than anticipated or if receipts are higher, this results in lower spending. The relevant Ministers will be able to give the details for each Vote to the Deputy.
Turning to the 2005 Exchequer balance, this showed an outturn deficit of €499 million compared to an original budget day target deficit of €2,988 million. This improved outturn was partly driven by lower than expected expenditure but was primarily due to higher than anticipated tax receipts during the year. Tax revenues for 2005 were €1.75 billion above the level targeted on budget day 2005. The improvement was due to a number of factors, including Revenue Commissioners special investigations, buoyancy in the property market, strong employment growth and the strong performance of the economy in general. I am sure the Deputy would agree that this positive budgetary performance is a welcome development.
On Estimates day in November the Minister for Finance stated that the targets for spending were broadly on course and on budget day, 7 December, he stated that there would be €92 million in unspent balances on current spending, which is a significant jump on the position in previous years. However, by 31 December that figure of €92 million had jumped to an underspend of €564 million on current spending.
There are only two possible explanations for this. Either officials in the Department of Finance cannot add, which I refuse to believe, or an election war chest is being built up so the Minister can distribute largesse during the period before the election. As with the actions of the former Minister, Mr. McCreevy, in the run-up to the 2002 general election, that was good for Fianna Fáil but it was not good for our economy. Given the trolley crisis, the lack of nurses and all that we know about underspending and demands for services, the Minister is telling people that he underspent by €564 million.
I would like the Minister to comment on a further consequence. He stated that the budget increase in spending for this year was approximately 11.9%. Given the adjusted figures which he introduced on 31 December, the estimated increase in spending this year will be approximately 13.8%, which points to a pre-election spending splurge. Will the Minister explain how we makes sense of this chopping and changing with regard to the figures?
If there is any chopping and changing, I have just heard it from the Deputy. On the one hand she accuses me of underspending in one year and, on the other, she tells me I am spending too much in the next year. The bottom line is that last year the total Exchequer spend was €35.467 billion. There was an underspend of €225 million, when all the headings are taken into account, as well as a €300 million increase in receipts. Therefore, there was not a €564 million underspend.
The issue with regard to the final Exchequer balance at the end of the year, as I explained in the main body of my reply, is that the variations between spending costs and outturn depend on the final take-up of demand-led schemes, the timing of bills received by suppliers and contractors and the level of receipts, which are reflected in net expenditure and which cannot be predicted with certainty. The basis of the end of October figures for the Estimates requires the following two months data to finalise the figures for any given financial year.
I emphasise that the level of spend is such, at almost €35.5 billion, that the variation is quite small as a percentage of overall spend. It is based on calculating the balances at the end of the year and depends on what cheques have issued and what bills have been paid before 31 December, all of which must be finalised.
Total gross expenditure by the Department was approximately €45.1 billion last year, which is an increase of 9.5%. The allocations for health and other areas represented record increases, including an increase of 10% for health. All the changes we have seen with regard to the HSE and otherwise have ensured that we are in the business of transforming and transitioning health expenditure from the health boards to the HSE.
The total spend is as I have indicated. It is not made on the basis of building up war chests or any other conspiracy theory. It is simply a matter of explaining the spend at the end of the year, as was done in other years, and making sure that we go forward to meet the requirements of the situation and implement the spending we envisage for this year, which will be in the priority areas of health, education and social welfare, which received record increases. I defend that spending. If the Labour Party believes we spent too little last year and are spending too much this year, we will have to wait to hear what the spinning top will say at the end of this year to know what its view is at that time.
The Minister's pre-election cash pile is piling up faster than the trolley counts in our hospitals. On a day when we heard that young people are paying record amounts for an average family house, is the Minister not concerned that what he has done in terms of bumping up spending in the pre-election year after depressing spending last year is playing fast and loose with the Irish economy? The former Minister, Mr. McCreevy, did it and I am sorry it seems the current Minister is determined to repeat it. The only people who will have to bear the fall-out from this are those who did not get the services they were entitled to last year——
I refute all those political assertions because they have no foundation in fact. I remind the Deputy once again that we had a deficit last year of €499 million so I do not know where I am supposed to be storing up this money. Thankfully, due to the extraordinary continued growth in our economy and the employment we are creating, the deficit was €1.75 billion less than was expected, which I would have thought was to be welcomed. I noted when that information emerged that the Opposition found it depressing news.