Éamon Ó Cuív (Galway West, Fianna Fail)
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92. To ask the Minister for Public Expenditure and Reform the expected growth in Government expenditure in 2022 compared to 2021; if this is in line with the budget day forecast; and if he will make a statement on the matter. [20987/22]

Éamon Ó Cuív (Galway West, Fianna Fail)
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There have been many announcements about quite significant expenditure. I have to give the Minister great credit for that because lots of things have happened that many of us would have liked to happen in the past, but he will know better than I do that we cannot keep writing the cheques forever. In view of the war in Ukraine, what will the likely outcome be in respect of expenditure at the end of the year? Significant extra costs are being borne and we are told the economy and growth this year will not be as robust as we had hoped. Will the Minister give me an outline, at this stage of the year with four months gone, of how we are going ahead?

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Deputy for raising this question. The draft stability programme update, SPU, 2022, published on 13 April, outlines the latest fiscal and economic projections for 2022. The SPU outlines core expenditure of €80.1 billion for 2022. With non-core expenditure of €7.5 billion, including in respect of Covid funding and the Brexit adjustment reserve, this gives an overall Government expenditure ceiling of €87.6 billion. This compares to overall gross voted expenditure of almost €87.5 billion in 2021, inclusive of capital carried over. While in year-on-year terms expenditure is broadly flat, there is a significant reduction in Covid expenditure that is offset by an increase in core expenditure. As outlined in the SPU, there is an increase of €2 billion in capital spending this year compared to last year.

The Government expenditure ceiling set out in the SPU is in line with that set out in the Revised Estimates 2022. The overall gross expenditure amount in the Revised Estimates was inclusive of an unallocated Covid-19 contingency reserve of €3.9 billion. At this stage, taking into account the increased supports introduced in response to the December wave of the virus, and additional funding required for the one-off cost-of-living measures introduced in recent months, about €1.5 billion of this reserve is now committed. In addition, there will be additional Covid-related expenditure that will need to be met from this reserve later in the year, in particular, as we enter the winter period. This reserve funding will also need to be utilised for the provision of supports to refugees arriving from Ukraine. The costs relating to refugees will continue to be assessed by my Department, including in the context of the summer economic statement, to ascertain the extent to which these costs can be met within existing departmental and overall allocations taking into account any emerging underspends.

Éamon Ó Cuív (Galway West, Fianna Fail)
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The answer is very comprehensive. There has been an extraordinary response to the Covid pandemic over the past few years. As free money was available from Europe, we were able to spend our way out of it, which was very positive. I have no difficulty with that, but it entailed borrowing large amounts of money. That was fine when that money was coming at virtually zero cost but we know that due to high inflation central banks worldwide and the European Central Bank are now talking about putting interest rates up. It would appear that particular period is coming to an end, which means that we all have to be a little more careful about balancing the books.

I will separate capital expenditure from current expenditure because, as far as I am concerned, the former is investment while the latter is gone in the year it happens. Part of the reason for good results on the expenditure front in previous years was an underspend in capital. I do not think we should rely on that. If we look at the current spend, taking all the contingencies we now know about into account, such as Covid, as the Minister outlined in detail, and the Ukrainian crisis, how near to projection will the current spend come in at the end of the year based on what we know at present?

Michael McGrath (Cork South Central, Fianna Fail)
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In the current year, we provided for a reserve of almost €4 billion, €1.5 billion of which has now been spent or accounted for. That €4 billion was, in effect, earmarked for Covid-related expenditure. It is anticipated it will not all be needed for that, although some of it certainly will. We have said that the cost of looking after Ukrainian refugees who come here will also be met from that reserve. We have an overall Government expenditure ceiling of €87.6 billion. It is my expectation that expenditure in overall terms will be managed within that ceiling, which was agreed on budget day and brought forward in the Revised Estimates volume in December of last year.

The Deputy is correct to point to elevated debt levels. Our debt now stands at approximately €236 billion. We spent €30 billion in direct expenditure measures across 2020 and 2021 related to Covid and made an overall provision in the current year of approximately €7 billion. We are seeing Covid spending fall but core spending is increasing. As the Deputy knows, we now have a medium-term fiscal framework that anchors growth in core expenditure to the underlying trend growth rate in the economy, which is about 5%. That is built into our framework. Although there are always pressures, I am determined to ensure that we manage our public expenditure in a sustainable and responsible way. That involves being very careful with taxpayers' money.

Éamon Ó Cuív (Galway West, Fianna Fail)
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I welcome that. We talk about sustainability on so many fronts but this is about financial sustainability. The Minister has been doing an extraordinary job because, as I said, the Government has been making money available, aside from Covid and the crisis issues, for other things that needed to be done in our economy, especially in respect of capital expenditure because we have a massive deficit in that regard.

I take it a big factor in budgeting for 2023 - as Covid, please God, becomes less and less of a feature - will be its replacement by the full-year cost of the Ukrainian crisis, if refugees continue to come. The Minister stated expenditure will increase by 5%. That includes all the expenditure on the Ukrainian crisis. I take it that will be a big factor in budget arithmetic coming into the autumn. Will he briefly outline the effect this will have on a full-year basis?

Michael McGrath (Cork South Central, Fianna Fail)
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As the Deputy knows, in the stability programme update we have made provision of up to €3 billion for the cost of looking after refugees across a full year next year. It is a high-level estimate. In truth, we simply do not know what the real cost will be. So much depends on the number of people who come here, how many of them stay, and to what extent they will join the labour force and work. It is a high-level estimate but we have made provision for it.

We have the largest budget ever in the history of the State for capital expenditure at €12 billion. The challenges we face are delivery, or getting projects done, and ensuring we achieve value for money. We are seeing, as the Deputy will be well aware, significant increases in construction inflation. That is now manifesting itself in new tender prices that are coming in for projects. There are significant challenges in that space. During parliamentary questions, we discussed what might need to be done to address that. I need to make sure on the one hand that signing up to public works contracts is a viable proposition for contractors, while on the other I also need to make sure we get value for money for taxpayers.