Gerald Nash (Louth, Labour)
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72. To ask the Minister for Public Expenditure and Reform to set out how he plans to limit the deployment of so-called "non-core" expenditure as he develops plans for budget 2025; and if he will make a statement on the matter. [20050/24]

Gerald Nash (Louth, Labour)
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The use of non-core expenditure has become a feature of budgets in recent years, and the continued use of this device is concerning not only to me and Members of the House but, as the Minister knows, also to the Irish Fiscal Advisory Council, IFAC. Will he explain how he intends to limit the use of this device ahead of budget 2025?

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputy for the question. In the period since 2020, the Government has had to negotiate a number of exceptional challenges, from Brexit to the Covid pandemic to the war in Ukraine and the subsequent impact on energy prices. All of these challenges required a response from the Government which had significant cost implications for the Exchequer. As a matter of policy it was decided to separate funding to address these challenges from the day-to-day costs of Departments. The funding for these external challenges was termed non-core expenditure.

Non-core expenditure has proved an effective approach to expenditure policy as it provided flexibility to respond to external shocks while protecting and enhancing core, day-to-day investment in public services and increasing the level of investment to meet our infrastructure demands

The amount of non-core expenditure has fallen from a high of more than €15 billion during the pandemic in 2020 to €4.5 billion in 2024. I continue to liaise with line Ministers to unwind such expenditure when it is no longer needed, the fall in Covid expenditure and the winding down of Brexit-related expenditure being key examples.

Budget 2024 made provision for €4.5 billion in non-core expenditure. This consisted of €2.6 billion to deal with consequences of the war in Ukraine, approximately €1.3 billion for legacy Covid issues in the health area, and other capital projects and EU funding requirements. This 2024 allocation is broadly in line with the provisional outturn for 2023.

In the stability programme update published last week, the Minister for Finance and I agreed to include a contingency reserve of €4.5 billion in each year from 2025 to 2027 to reflect our recent experience with non-core expenditure. The adequacy of this will be assessed closer to the budget and then reviewed in the context of the summer economic statement.

Gerald Nash (Louth, Labour)
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I thank the Minister. Nobody is arguing that we did not have a necessity for additional spending in recent years. The issue is the means by which the Government has presented the spending. The Minister will recall the phrase used by IFAC after budget 2024, when it described the way in which expenditure was presented to the House as a form of "fiscal gimmickry". This was a very serious accusation to make. The Parliament has very limited function in real terms in the making of budgets and holding the Government to account. It is becoming much more difficult. We have had four different kinds of description of spending in budgets in recent years and look at what applied to budget 2024. We have had core spending, non-core spending, windfall capital investment and once-off cost-of-living measures. In the interests of accountability and transparency in terms of how budgets are presented, I ask the Minister to look again at how budget 2025 will be presented to the House and do it in a different way.

Paschal Donohoe (Dublin Central, Fine Gael)
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This is something I and the Minister for Finance are considering at the moment. With regard to the charge, if that had been made, about the presentation of the budget and the policy content of it, we are one of a small group of countries in the European Union that has a surplus. Budget policy has evidently not contributed to the growth of inflation in our economy. The rate of expenditure growth in our economy in recent years has been either in line with or, in many cases, significantly below the rate of inflation our economy also experienced over those years. I am very happy to make the case that we have tried to and been successful in managing our economic policy in a responsible way when trying to lay the foundations for safety in the future while dealing with the issues of today. I take the Deputy's core assertion that we have to look at how we present budget 2025 in a way that is different from how we have used some of the instruments in recent years.

Gerald Nash (Louth, Labour)
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Nobody is arguing that we did not require additional supports for those who are less well-off and those on modest incomes in terms of battling through the cost-of-living crisis. It is how we have presented it in the House. In recent years the budget has been presented in a very opaque way. Many budgetary items described in recent years as "once-off" have, in fact, persisted. This is the issue that IFAC has with the way in which the budget is presented.

If we look at the early round of budget kite flying at present, and take social welfare payments as an example, the Tánaiste has been floating the idea of a €12 weekly increase in pensions. The cost-of-living package for those who rely on social welfare payments for their income is indicative of the fact there is an admission by the Government that weekly social welfare payments are entirely inadequate to assist people in their everyday lives. We know the value of the pension has diminished as inflation has increased. When we say that inflation is reducing, what we should be saying is that the rate of inflation is slowing. Things are still very expensive. When we look at how budgets are presented, we need to acknowledge the fact that we need to look, for example, at the social welfare system through the lens of income adequacy and not merely figures plucked out of the air as the Tánaiste did when he said we should consider a weekly pension increase of €12.

Paschal Donohoe (Dublin Central, Fine Gael)
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I differ from the Deputy on the point he has made regarding the value of the non-core expenditure framework. The reason for this is if we look at where we have been with non-core spending the reason it was allocated differently is we wanted to avoid the risk of the spending becoming permanent and being embedded in how we spend our country's money at a time in which the emergency that required the spending of that money had moderated.

The biggest items of non-core expenditure are either gone or reduced. I look back at the Covid pandemic, and the big economic tools we had to help our economy are gone. In fairness, not many in the House are calling for their restoration. Even if I look at where we were for this year with the energy credits, their value was reduced versus a year ago. I do take the Deputy's point that we need to look at ways in which we can have a framework for our spending that is appropriate to the fact that while many of the issues we hoped would be temporary have been, some of them may not have been. The Minister, Deputy Michael McGrath, and I began progressing that by framing the stability programme update by making reference to a contingency reserve of €4.5 billion.