Tom Parlon (Laois-Offaly, Progressive Democrats)

I am happy to return to the Seanad to resume discussion of the Appropriation Act 2004. Since the matter was last debated in December 2004, the Bill was enacted giving statutory effect to the departmental Estimates for supply services for 2004.

Regarding the budgetary outturn for 2004, economic growth on a GDP basis in 2004 was estimated at 5.3%. This excellent performance confirms Ireland weathered the international recession of 2001-02 better than most and emerged in good shape to take advantage of the international economic upturn. The outcome of the 2004 budget was also excellent. The projected general Government deficit was €1.6 billion, but the estimated outturn was a surplus of approximately €1.4 billion. The projected Exchequer borrowing requirement was a deficit of €2.8 billion, but the outturn was a surplus of €33 million. While this good performance benefited from once-off tax receipts of €695 million, the overall economic and budgetary outturn is testament to the Government's continuing excellent management of the economy in good times and bad.

The Government's successful management of the public finances and the economy has resulted in a major reduction in the debt burden, with the general Government debt falling from a level close to 100% of GDP in the early 1990s to its current level of approximately 30% of GDP. Good government and sound policies mean that the prospects for the economy are positive for the next several years. They have generated the resources to enable the Government to continue to target the needy and to spend more on addressing economic and social needs.

The Government's approach to expenditure in 2004 was to continue it at sustainable levels to promote sustainable economic growth, while continuing the policy of targeting resources to the greatest areas of need. Gross expenditure on the public services was over €41 billion in 2004, an increase of 7.1% over 2003. The Government continued to give priority to social welfare, health, education and infrastructure. Health, education and social welfare spending in 2004 accounted for 68% of total voted spending. This expenditure continued the Government's policy since 1997 of investment in public services. This increased level of investment has delivered real improvements in services.

Expenditure on health amounted to over €10 billion in 2004. Between 1997 and 2004, gross expenditure on health increased by €6.4 billion, or 177%. Over 98,000 staff were employed last year in providing health services compared to 68,000 in 1997. During this time, an additional 6,000 nurses have been recruited, amounting to 20% of the total increase. A further 9,000 people, 30% of the increase, have been recruited to the medical, dental and health and social care professional grades. This investment has seen real improvements in the delivery of frontline health services. Greater throughput in hospitals has seen a 30% increase since 1997 in the number of patients treated in hospitals as inpatient or day-care patients. With reductions in waiting lists, 80% of patients now wait less than one year. The elective surgery rate in public hospitals increased by 85% between 1995 and 2002.

Spending on education in 2004 amounted to €6.6 billion, a doubling of expenditure since 1997. This level of spending has funded significant improvements in frontline education services. By the end of 2004, approximately 2,500 resource teachers and 1,530 learning support teachers were employed in the primary system to enable children with special educational needs receive a proper level of educational services. Over 5,500 special needs assistants are now employed in first and second level schools to ensure that children with special educational needs in mainstream classes receive necessary educational supports. This represents a massive increase in resources for special needs compared to a base of 400 in 1999. The pupil-teacher ratio at both primary and second levels has improved. At primary level, the ratio has fallen from 22.2:1 in the 1996-7 school year to 18:1 in the 2002-03 school year. In the same period, at second level the ratio has fallen from 16:1 to 13.6:1.

The 2004 allocation for social welfare was almost €11.3 billion with spending on social welfare increasing by over €5.5 billion since 1997. Over the same period, the unemployment rate was halved from 10.3% to less than 5%. Over the period 1997 to 2004, the old age contributory pension increased by 69%, an increase of 32% in real terms. The increase in the non-contributory pension was even greater at 80%, an increase of 41 % in real terms. The lowest social welfare rate, the supplementary welfare allowance, increased by 62% over the same period, an increase of 27% in real terms.

Exchequer-funded public service pay and pensions amounted to €14.2 billion in 2004, an increase of €1.2 billion or 9% in 2003. This rate of increase in the pay bill is lower than the rate of increase in any of the preceding four years. This expenditure allowed payment of the general round increases under Sustaining Progress, amounting to €540 million, the 2004 increases arising from benchmarking, amounting to €305 million, and other pay provisions, amounting to €280 million. The €280 million of the additional pay cost was due to the payment of the increase arising from the application of the part-time work legislation in education, an increased provision for the EU Presidency, increments, an extra pay day for some staff in 2004 and an increase in pensioner numbers. Payment of the benchmarking increases and the provision for the general rounds was on the basis of verifiable progress by the performance verification groups on the conditions outlined in the agreement. Service improvements for taxpayers are therefore being secured in return for this expenditure through the achievement of the modernisation objectives.

Since 1997 the Exchequer has invested €33 billion in capital expenditure. Capital investment in recent years has been approximately twice the EU average. Progress continues to be made in addressing the country's infrastructural deficit under the national development plan. Exchequer capital expenditure was €5.5 billion in 2004. Capital investment in the transport area amounted to €1.6 billion, an increase of €1.3 billion or 417% over 1997 levels. Of this, €1 billion was for road investment and €0.3 billion for public transport. This is delivering real improvements in services on the ground. Our interurban road routes and public transport capacity have been significantly enhanced. The 2004 Exchequer spend on housing capital was over €1 billion. This was supplemented by over €700 million of non-voted capital investment by the local authorities. Some 5,000 local authority houses were built in 2004. Between 1997 and 2004, over 35,000 local authority, voluntary and co-operative houses have been provided.

In the 2004 budget, the then Minister for Finance, Mr. McCreevy, announced capital investment would operate on a five-year, multi-annual allocation basis. A key innovation under this framework was the introduction of a facility allowing Departments to carry over capital savings from one year to the next. The capital envelopes and the facility to carry over gives Departments and implementing agencies more flexibility, allowing them to plan, manage and implement programmes and projects more efficiently and effectively. Provision was made in the Appropriation Act 2004 for the carryover at Vote level of some €237 million from 2004 into 2005, some 4% of total voted capital for 2004. This €237 million carryover relates mainly to €75.6 million for the Department of the Environment, Heritage and Local Government for priorities such as local authority and social housing, €50 million for the Department of Education and Science for the school building programme, €42.7 million for the Department of Transport, mainly for road improvements, and just over €34 million for the Department of Enterprise, Trade and Employment to fund capital grants to industry, science and technology and FÁS capital.

Under the capital carryover legislation, the capital carryover cannot be spent until the Minister for Finance makes an order specifying the capital subheads in each of the Votes concerned against which the money will be spent. As soon as the order is made, the carryover amounts become a first charge against the subheads concerned. This order must be made before 31 March. The draft order will be submitted to the Dáil for approval shortly.

Some commentators have not appreciated the significance of this carryover facility. Their focus on the €237 million carryover has been on the fact that Departments and implementing agencies did not spend these resources in 2004 rather than the fact that under the old annual system this money would have been lost to the capital programme or, perhaps worse, spent on less meritorious projects at end year in a scramble to avoid surrendering the funds to the Exchequer. The initiation of the carryover facility is an important vehicle to better assist the planning and management of capital programmes and to ensure against less than optimal spending of valuable capital resources or the unnecessary loss of resources for programmes.

While the Appropriation Act 2004 relates to expenditure in 2004 it is important for this House to reflect on the expenditure provisions of the 2005 budget. Additional spending of over €3.7 billion more than 2004 was provided for in the 2005 budget bringing the gross spending for 2005 to almost €45 billion, an increase of 9.1%. An additional €334 million in Exchequer capital was provided for which, together with the capital carryover of €237 million, will mean that almost €6.3 billion in Exchequer capital will be available this year under the 2005-09 capital envelopes for addressing infrastructural priorities. The budget also provided for improvements in social welfare payments worth €874 million. For example, the old age pension was increased by €12 per week or 7% bringing the old age contributory pension to €179.30 per week. The Government is well on the way to achieving the programme for Government commitment to increase the State pension to €200 per week by 2007.

Further evidence of the Government's commitment to meeting social needs was the introduction of a multi-annual funding programme with a total value of close to €900 million for people with a disability. The funding is being dedicated for the period until 2009 to ensure delivery of high priority disability services. The package includes guaranteed additional current spending of almost €600 million. Some €2.8 billion overall is being provided in 2005 specifically for people with disabilities. This represents an increase of €290 million or 11% on the 2004 figure.

The bulk of the new funding package will go to the health sector where it will be invested in services for persons with an intellectual disability and those with autism, services for persons with physical or sensory disabilities and mental health services. It will focus in particular on the provision of extra residential, respite and day places, extra home support and personal assistance and extra places in community-based mental health facilities. Together with the 2005 funding, it is estimated that, by the end of 2009, over 4,500 extra residential, respite and day places will be provided for persons with an intellectual, physical or sensory disability or autism, about 600 persons with intellectual disability or autism will be transferred out of psychiatric hospitals and other inappropriate placements, about 1.2 million extra hours of home support and personal assistance will be provided for persons with physical or sensory disabilities and 400 new places will be provided in community-based mental health facilities.

The balance of the 2006-09 disability funding package is being allocated between four other Departments or offices. These resources will be used to enhance education services for adults with disabilities and expand pre-school provision, support projects which demonstrate an innovative and cost effective approach to service provision and improve accessibility to public buildings and amenities.

The Government is strongly committed to securing better value for money from public expenditure so that we get the maximum return from the high levels of investment. I have already referred to the merits in this regard of the new multi-annual capital envelopes framework. One of the conditions of the Department of Finance sanction to incurring expenditure under the capital envelopes requires Departments and their agencies to comply with the 1994 Department of Finance guidelines for the appraisal and management of public expenditure in all cases. Consultations with Departments on revising the existing guidelines are now complete. Revised guidelines will shortly be circulated to Departments and implementing agencies.

There are also reforms planned in the area of public sector contracts for construction and construction related services. The reforms will involve the amendment and introduction of new standard forms of construction contracts which will transfer appropriate risks to contractors where they are best placed to manage them. These initiatives seek to reduce the potential for project cost overruns and provide better value for money for the State. Consultation with the construction industry on the contract related material will commence shortly. Work has been ongoing within Departments and offices generally on developing performance indicators in the context of the roll-out of their management information frameworks. Departments have put cross-divisional arrangements in place to develop and improve their use of performance indicators. A pilot project under the chairmanship of the Department of Finance and involving the Department of the Taoiseach and the pilot Departments — Transport, Agriculture and Food and Social and Family Affairs — is examining ways of improving the links between departmental business planning, resource allocation as in the Estimates and output reporting. The report on the pilot project and the pilot models is being finalised in light of the views last September of the financial management sub-group of Secretaries General and they will be submitted to the Minister shortly.

In his 2005 budget the Minister for Finance signalled his intention to consider reform of the budget policy formulation process. He is currently examining a number of options for change which could be implemented in the short and medium term. Any changes to current practices would need to meet best practice, improve both the quality of debate and the data available to the Dáil on the budget, meet our obligations to the EU and be capable of being delivered within the existing budget timetable. He has indicated his intention to discuss the possibilities for change shortly with the Government and at that stage to bring forward proposals for discussion.

The Government's successful management of the public finances has meant that it continues to promote sustainable economic development and to generate the necessary resources to target key economic and social priorities. The 2004 expenditure and the allocations for public services as set out in the Estimates and the 2005 budget will ensure that we continue to make real economic and social progress.