Question proposed: "That the Bill be now read a Second Time."

Minister of State at the Department of Finance (Mr. Parlon): I welcome this opportunity to address the Seanad on the Appropriation Bill 2003, the main purpose of which is to give statutory effect to the departmental Estimates for supply services, both current and capital, including all Supplementary Estimates approved by the Dáil since the last Appropriation Act. Apart from the main provisions dealing with the Estimates, the Bill also includes a technical provision to allow for deferment of the end-year deadline for the financial resolutions passed on budget night. As in previous years, the Seanad is also being asked to approve an early signature motion to facilitate a request to the President to sign the Bill earlier than would normally be the case.

The Bill appropriates to the various services listed in the Schedule for the year ending 31 December 2003 the net sum of €31,040,999,000. This amount comprises the original net Estimates of €30,79,1512,000 approved by the Dáil prior to the summer recess and net Supplementary Estimates of €249,487,000 recently approved by the Dáil. The Bill also seeks approval for the use of departmental receipts amounting to €2,625,126,000 as appropriations-in-aid of the services listed in the Schedule.

As indicated by the Minister for Finance in the debate on the 2003 Estimates, the strategy underpinning the Estimates was to bring our spending increases more into line with the rate of growth in tax revenue. The only other alternatives would have been higher taxation or higher borrowing. While following an approach of prudent management of the public finances, the Government also sought to provide substantial funding in 2003 for the priority areas of health, social welfare, education and transport infrastructure.

As already stated, the Estimates and Supplementary Estimates included in the Schedule to the Appropriation Bill have already been approved by the Dáil. The Bill seeks to give formal legal effect to these. I will now briefly outline some of the detail of the Bill.

Section 1 gives statutory effect to the departmental Estimates for the supply services, including all Supplementary Estimates, approved by the Dáil since the last Appropriation Act. Subsection (1) of this section appropriates the total net provision of €31 billion to the various supply services for Departments and offices as listed in the Schedule. In addition, subsection (2) provides for the application of a total amount of over €2.6 billion in departmental receipts as appropriations-in-aid of the grants for the supply services of those Departments and offices.

The Dáil approved the original 2003 net Estimates for departmental spending which totalled €30.8 billion prior to the summer recess. Since then, it has approved 12 Supplementary Estimates for various Departments totalling nearly €250 million. This extra amount brings the net total grant for spending on supply services in 2003 to over €31 billion. Allowing for appropriations-in-aid of over €2.6 billion, Departments and Offices were allocated nearly €34 billion to fund gross spending on services and programmes. This is before account is taken of non-Exchequer spending from the social insurance fund and the national training fund of a further €4.9 billion. In total, therefore, nearly €39 billion was provided for investment in programmes and services in 2003.

As stated, nearly €250 million was approved in supplementary funding in 2003. I will now outline briefly the main factors which have given rise to the additional expenditure and the requirement for the Supplementary Estimates this year. The amounts are as follows: Department of Social and Family Affairs, €85 million; Department of Education and Science, €65.7 million; Department of Health and Children, €62.5 million; increases in remuneration and pensions, €36 million; and small or token Supplementary Estimates across a range of other Votes, €300,000.

The additional spending requirement for the Department of Social and Family Affairs in 2003 is €85 million. This arises mainly from additional costs of supplementary welfare allowances, mainly rent supplement, child benefit, free schemes, carer's allowance, disability allowances and the cost of the Christmas bonus at 100%.

A Supplementary Estimate was sought by the Department of Education and Science in order to provide additional funding of €12 million for third level higher education grants and to meet an expected shortfall on receipts from the European Social Fund – ESF. The Supplementary Estimate allowed for a significant shortfall on ESF receipts of €53.7 million, whereas the expected shortfall on the Education and Science Vote is some €18 million. In order to be prudent – because ESF receipts are received very late in the year – the Supplementary Estimate has allowed for the eventuality that there is a bigger shortfall than is actually expected.

The net additional spending requirement in 2003 for the Department of Health and Children is €62.5 million which is significantly less than 1% of the overall budget for the health services. Of the total Supplementary Estimate required, the bulk is in respect of pay awards and agreements delivered through recognised processes and additional spending on the demand-led general medical scheme. The pay awards were to meet the costs of the parallel benchmarking process and the settlement of the public health doctors' dispute. Additional spending on the GMS of €60 million was also allowed for in the Supplementary Estimate. This a demand-led scheme provided under specific statutory entitlement. It should be noted that the extra costs arising in these areas were partially offset by savings in other programmes or surplus appropriations-in-aid. This reduced the net additional amount sought from the Exchequer to €62.5 million.

No provision was included in the revised Estimates published last February for the costs of settling an equality case with the CPSU grades as the negotiations were ongoing at that stage. A separate Vote for increases in remuneration and pensions has now been introduced from which the costs arising in the various Offices and Departments are being paid. This means that separate Supplementary Estimates are not required on the individual Votes concerned. The provision for the settlement, including employer's PRSI costs, is €36 million.

A number of small or token Supplementary Estimates were also approved across a range of Votes. Small Supplementary Estimates – less than €300,000 – were sought for the Civil Service Commission and the Office of the Ombudsman in order to allow additional appropriations-in-aid to be spent and fund some additional accommodation and pension costs arising.

Three token Supplementary Estimates were sought for the Justice group of Votes to fund additional costs in certain areas which were fully offset by other savings or additional appropriations-in-aid. Token Supplementary Estimates were sought by the Office of the Comptroller and Auditor General to allow that Office spend additional appropriations-in-aid. The Department of Community, Rural and Gaeltacht Affairs took a Supplementary Estimate in order to provide additional money for the Western Investment Fund, a grant-in-aid subhead, while the Office of Public Works took a Supplementary Estimate for technical reasons.

The Supplementary Estimates do not convey the full story in relation to expenditure on services provided by Departments in 2003. It is anticipated that the additional pressures reflected in the Supplementary Estimates of nearly €250 million will be offset by savings elsewhere across the Votes. This means that the supplementary funding approved is consistent with the forecast outturn included in the recently published White Paper on Receipts and Expenditure.

It is expected that there will be a net excess on voted spending on services of €115 million, less than one half of 1% of the revised Estimates provision. The year-on-year increase in net voted spending is expected to be 7.1% which is in line with the target set when the revised Estimates were published last February. The actual end of year outturn will be published as part of the end of year Exchequer statement on 5 January.

I will now deal with section 2 of the Bill. Article 17.1.2o of the Constitution requires that the Financial Resolutions of each year must be enacted into law by the end of that year but also allows for the end of year deadline to be deferred if an Act to that effect is passed before the end of that year, in this case, before 31 December 2003. This section makes provision for this deferment to be invoked. The inclusion of this provision in the Appropriation Bill will maintain the normal statutory deadlines for passing budget measures into law, that is, 84 days for completion of Second Stage and four months for enactment of the Finance Bill. Identical provisions have been included since the 1997 Appropriation Act.

The Seanad is also being asked to approve an early signature motion in order that the President may be requested to sign the Bill earlier than the fifth day after it is presented to her. The Seanad's approval for such a motion is sought each year in order to ensure the necessary legislative authority is in place for the final end of year issues from the Exchequer.

I take this opportunity to review briefly the improved arrangements for the control and management of public expenditure agreed by the Government and introduced this year. Members of this House may recall the debate on the matter last February. The measures introduced included: the publication of the 2003 spending profiles last January; the preparation of monthly spending reports for Government by the Minister for Finance; the preparation of bi-monthly reports for Government by the Ministers of the four largest current spending Departments – Education and Science, Health and Children, Justice, Equality and Law Reform, and Social and Family Affairs; and arrangements for more proactive management of spending by Ministers and their Departments.

The publication of the monthly spending profiles for each ministerial Vote group was a new initiative which facilitated a more informed and transparent assessment of emerging spending trends over the year as a whole. The monthly reporting by the Minister of Finance to Government, together with the bi-monthly reporting of the four largest spending Departments, over the course of the year ensured any emerging issues were identified early. It also facilitated timely action, where necessary, by the relevant Ministers.

The management measures introduced to facilitate expenditure control within Departments included: more effective management of spending on demand-led schemes; better risk assessment and contingency planning to cater for unforeseen pressures; and the more timely provision of the end of month spending returns to the Department of Finance. More effective management of their budgets by Departments and Offices was also facilitated by allowing them to retain savings generated from efficiency measures, the disposal of surplus property or extra income generated by them. These efficiency savings were used to fund high priority programmes within their area of spending. The new arrangements have worked well. They have helped to secure better management of resources in the delivery of public services within overall budgetary targets. They have also improved the accountability of Departments in their public spending.

The announcement in the 2004 budget of the introduction of five year rolling multi-annual capital envelopes for public investment will build on recent improvements in public expenditure management. This initiative will assist Departments and their agencies to better plan and manage their capital programmes. Together with the planned introduction of revised capital appraisal guidelines and proposed new arrangements for public sector construction contracts and related services, they will deliver better value for money. The 2003 public capital programme included more project level information. These presentational improvements will be further improved in the 2004 publication in the light of the project-programme level reporting arrangements which it is proposed to put in place as part of the new capital envelopes system.

The level of funding provided by the Government in 2003 – nearly €39 billion for gross spending on services – builds on the significant investments made since 1997 and consolidates the significant economic and social progress made since. The strategy underpinning the 2003 Estimates of matching increases in public spending to revenue increases has been continued into 2004. This sound approach to the management of the public finances will ensure we are well positioned to take advantage of the expected upturn in the international economy. The Government's commitment to improved management of the public finances is not just about the control of public spending, it also involves significant improvements to the management arrangements which are designed to secure better value for money and greater accountability.

I commend the Bill to the House.

Mr. J. Phelan: I welcome the Minister of State to the House and note he did not mention decentralisation during his contribution on this Bill. I am glad he is politically unscathed given what has occurred during the past couple of weeks. The Minister's contribution was laden with figures as one would expect on an Appropriation Bill.

A number of people have commented in the past couple of weeks on the Minister for Finance's newfound commitment to fiscal rectitude, an issue on which I have strong views. The Minister for Finance has purported during his political career to being a believer in the idea of fiscal rectitude. However, he has not put that into practice during the past couple of years. He has tightened the belt somewhat this year and that is reflected in the fact that the amount provided for in the Appropriation Bill this year is less than last year.

The House has just completed its debate on the Social Welfare Bill, during which the Minister for Social and Family Affairs, Deputy Coughlan, attended. The Minister of State referred to the Department of Social and Family Affairs throughout his speech. As it is the highest spending Department, it merits some discussion. He did not, however, refer to the 16 savage cuts being made by the Minister for Social and Family Affairs, Deputy Coughlan.

I was taken aback by some of the comments Senators made earlier. One Senator quoted from the Bible – I have not read it – saying it states "the poor will always be with us". That is a very condescending remark particularly at this time of the year. Many of the remarks made in this House on social welfare have been very condescending. It is easy for us to say the 16 cuts made were readjustments that needed to be made. Of course schemes implemented by the Department of Social and Family Affairs should be continually reviewed. Anyone who suggests that the cuts in food allowances and other schemes are not significant is not living in the real world. If the Government pursues that policy then, as Senator Mooney said, the poor will always be with us. Perhaps that will be the Government's catchphrase in the next general election. The Government adopted the catchphrase of "a lot done, more to do" before the last election and, it certainly has a lot more to do.

The Appropriations Bill, budget and Estimates do not go far along the road towards carrying out much of the work needing to be done. Members referred earlier to increases in child benefit. While there have been significant improvements in that area during the past couple of years, it is fair to say that a number of years ago, the Minister for Finance promised much greater increases than he delivered in this budget. In effect, people are again not getting what they were promised but that is nothing new.

The Minister of State did not refer to the Department of Agriculture and Food. I have continually asked, in this House and elsewhere, about funding for Teagasc. We are told that the budget this year for Teagasc will be similar to that provided last year. That sounds all right but it is not when one considers €17 million was cut from that budget last year. Lack of funding will pose tremendous problems for advisory centres around the country, many of which are at risk of closure. Some have already closed and the death sentence hangs over others. Lack of funding will not help to resolve that situation positively for those centres.

The Minister of State referred a number of times to the Department of Health and Children, the second biggest spending Department. It must be acknowledged that overall funding for that Department has been increased this year. However, there has been a corresponding reduction in the level of service provided on the ground. The manner in which the health service is currently being managed makes one feel we are throwing good money after bad. There is no commitment, as clearly shown by the Minister for Defence, to any reform of the health service. We can continue to pour money into it but the service we receive might not be that for which we all hope. There is no reform agenda for the health service. It is not a wise move, from the taxpayers' point of view, to continue to increase funding in that area. There must be radical change in the way the service is provided.

The Minister of State did not refer to the Department of the Environment, Heritage and Local Government in his contribution. The Minister for the Environment, Heritage and Local Government, Deputy Cullen, provided a once-off increase in local government funding specifically designed to deal with benchmarking. The local authority in Kilkenny as, in other areas, will have to pay €2 million annually to implement benchmarking. While we appreciate the once-off increase in local authority funding this year, from where will local authorities get that money next year and in subsequent years? The Minister has placed an albatross round the neck of every local authority. The idea of development levies has emerged during the past couple of months; they have been agreed in some areas and are pending in others. It is highly inappropriate that those trying to get on the property ladder should have to bear the brunt of funding local authorities into the future. Again, this Government has not considered reform of the mechanism for funding of local authorities. They seem to hop from one crisis to the next with no direction in the manner in which they are run.

Every so often the Minister for the Environment, Heritage and Local Government, Deputy Cullen, introduces what we are told is reforming legislation to deal with local authorities. In effect, more powers are taken from councillors and given to county managers, Departments and Ministers. It is fair to say that local government also needs a shake-up. No evidence of such reform has emerged during the past couple of months.

No reference has been made tonight to the Fianna Fáil parliamentary party taking part in a mock battle on community employment schemes. One of the kites recently flown is the rural social scheme announced in the budget. It appears from the funding given that there are only 2,500 places in that scheme which means it will not meet demand. I welcome the scheme while not knowing what is involved. More places must be provided if it is to be taken seriously. It is unusual to express relief that community employment schemes have not been cut further. There have been dramatic reductions during the past couple of years in the number of people participating in community employment schemes.

Mr. Parlon: And in the number of people unemployed.

Mr. J. Phelan: The Government cannot pat itself on the back when it has cut 10,000 places on such schemes during recent years. I have serious problems with this Bill. We are in the position in which we find ourselves today as a result of the mismanagement of public finances during the past number of years. While we are not in crisis, if decisions had been taken a number of years ago, we would not be in the position in which we now find ourselves.

Dr. Mansergh: I welcome the Minister and remind the previous speaker that Ireland's finances are among the best managed in Europe. We have the second lowest public debt and have had minimal borrowings, even during the downturn. I am confident that the outturn this year will be positive.

Benchmarking was mentioned. Among many others, former colleagues in the Department of Finance well deserve their award. The public finances were put on the correct trajectory in 1987 and have been kept on it since. While concerns were expressed in 2001 and 2002 when expenditure seemed to be growing at an alarming rate, it was well reined in during 2003. Both the IMF and the OECD believe the extra spending in 2001 that coincided with the downturn actually helped the economy achieve a soft landing. The public finances have been prudently managed. The outturn is within a small allowable margin. If anything, revenues are likely to be better than expected.

We can look forward to next year with a considerable degree of hope and optimism. It looks as though the economy has turned the corner and the downturn has been well managed. There has been a minimal rise in unemployment while employment has continued to rise, albeit at a slower rate. While parties often talk about cutbacks, they have been minimal. There are a certain number of cutbacks, or trimmings, every year. When one thinks of the large cutbacks in the 1970s and 1980s, the recent cuts have been minimal which can be attributed to good management of the economy. We have relatively little to complain about if we are hugely exercised by gross savings of €58 million in the context of the additional €630 million spent on social welfare.

As regards community employment schemes, the concerns of Fianna Fáil backbenchers, of which I am one, were wildly misunderstood. Leaked expert reports seemed to suggest that the scheme should be either drastically reduced or removed altogether. However, community employment will be maintained at this year's level for the next 12 months while a rural social scheme has also been introduced. Community employment schemes will continue to make an important contribution.

The Minister of State did not mention decentralisation, an enormously important and radical measure that is going to reduce near intolerable pressures on the capital city and help spread development and growth. While individuals may be opposed to it, I do not believe any party is. Senator Phelan will be glad to know that the chairman of the Fine Gael parliamentary party claimed credit for decentralisation to my home town.

Mr. J. Phelan: Hayes country.

Dr. Mansergh: He said he did not give the Government any credit for decentralisation.

Mr. J. Phelan: My party favours decentralisation.

Dr. Mansergh: The signs are that we will have a significant increase in inward investment next year. Tourism picked up by about 5% this year. People involved in the industry have told me the brilliant weather we enjoyed this year will encourage many to return.

The Minister of State will probably agree that agriculture had a better year. There is general agreement that the budget was good for the sector.

Mr. Parlon: It was welcomed by the farming organisations.

Dr. Mansergh: Up to a few years ago people were right to say they were not seeing the fruits of investment. However, we are now beginning to see them with better roads and rail services. We continue to forge ahead and the outlook is positive.

The school building programme was announced yesterday. It will be possible to do more in the coming year as yesterday's announcement did not take account of the extra €30 million allocated in the budget. It is always good to err on the side of caution. While I am not criticising it, the 5% increase in revenue projected in the budget is conservative. It will be greater than this and generate the resources we need to tackle the many social and infrastructural problems we face.

While I do not want to return to the debate on the Social Welfare Bill, the record of this and the previous Government on social welfare is remarkably good. Members have spoken about claimants being cut off from schemes. No existing claimant will be cut off; it will affect those who might make a claim on this basis in the future.

The Presidency of the European Union will present challenges for the Government in the coming six months. I hope it will be possible for the Taoiseach to bring his negotiating skills to bear and get agreement on the constitution that will allow us to more forward. I see dangers in allowing the ratification process to linger too long.

We also want to see progress in Northern Ireland where certain parties have never had the degree of responsibility they now have. They have a great opportunity to show what they can do to contribute constructively and it would not surprise me if some of them confounded expectations.

Dr. M. Hayes: I welcome the Minister of State and express my appreciation for the Minister for Finance's stewardship of the economy and the way he has conducted the business of the State during his period in office. I say this to put in context my remarks, which might be regarded as critical.

I have two main points to make, one about the paper clip and sealing wax end of the public administration continuum and another about a more serious matter. Will the Minister of State do something to deter Departments and semi-State bodies from lumbering my desk and post bag with very expensively produced and heavy reports full of photographs of chief executive officers, chairmen, etc.? It is a nonsense. It should be possible to specify some sort of standard format for reports brought before the House. We do not need cosmetics and vanity publishing in this area.

Another example of the lack of joined-up Government is that we have in the past year appended two additional pages to the Order Paper, thus making it a bound copy. I understand that if it is unbound it is VAT rated and that if it is bound it is not. This also seems to be a nonsense, apart from the waste of paper which contributes to the destruction of the rain forests.

The more serious point I want to make concerns the proposals for the decentralisation of the Departments, to which Senator Mansergh has already referred. I am probably lucky in that I do not have a constituency and am not attached to any particular town. I hope I can speak simply from my background in administration. I certainly have not been stimulated by any remarks the Minister of State made. Decentralisation is a bad idea and I totally disagree with Senator Mansergh's views on the matter.

If we were talking about real decentralisation or devolution, I would be all for it. If it meant giving powers to strong local authorities and powers, functions and staff to regional authorities, I would be all for it. However, this is not what is happening. I agree with Senator Mansergh regarding the need to demagnetise Dublin. This should be done by having three or four strong magnets or nodes of growth around the country and not 20 or 30 Mickey Mouse magnets. The latter approach does not work.

The national spatial strategy—

Dr. Mansergh: I would not describe my town in Tipperary like that.

Dr. M. Hayes: I withdraw my reference to "Mickey Mouse" but I regard Tipperary as a less strong magnet than others and not perhaps as electrically charged as we would like it to be. I assure the Senator that my remarks were not intended to reflect on the good citizens of Tipperary.

The national spatial strategy is flawed in that it tries to pretend everywhere can be a point of growth or a gateway. If one transferred Departments to three, four or five strong cities along with major hospitals and other facilities, one would create the quality of urban life and the sub-structural and cultural supports young people want, thus preventing them from having to come to Dublin.

The relocation of Departments may be based on a false conception of how they do their business. One can relocate support units and outsource much activity that could just as well be done in the Tipperarys of this world but the relocation of whole Departments is not desirable. All their work is not done by memo. Very often, it is done at senior level through meeting people in corridors. Let us consider an example of relocation in the North. The Department of Education was relocated to Bangor, which was only 12 miles down the road. It so happened that there was an empty factory in the town which somebody wanted to fill. The Department became separated from the administrative structure. Its staff did their own thing and one never saw them. The Department employed people from the local area and almost ghettoised itself. This broke down the interplay that occurred at senior level. Piecemeal and penny-package distribution of Departments is liable to seriously damage the quality of administration. I understand the argument for out-sourcing and relocating support services but I encourage the Minister of State to reconsider the idea of relocating the headquarters of Departments.

Minister of State at the Department of Finance (Mr. Parlon): I thank the Senators for their informed contributions to the debate on the 2003 provisions and the necessity to ensure appropriate measures are in place to deliver value for taxpayers' money. The 2003 spending outturn shows there was sound management of the public finances during the year. As Senators Mansergh and Maurice Hayes said, the Minister for Finance, Deputy McCreevy, is admired, particularly throughout Europe—

Mr. J. Phelan: Does the Minister of State still admire him?

Mr. Parlon: Totally. My views are on the record. I am very proud and honoured to work in his Department and am learning every day. I am also pleased to have the opportunity to participate in this debate.

Senator John Phelan raised a few issues to which I did not refer. Senator Mansergh responded to the points made about cuts in social welfare payments. There is an extra €995 million in the social welfare budget this year, representing an increase of 10% over the budget for 2003. One should also take into account the massive decline in unemployment and the massive increases in social welfare provisions.

Senator Mansergh referred to the adjustments. We must have a system with integrity. Adjustments will continue to be made and nobody will lose out because of them. The system is certainly compassionate in that if some people lose out it, will be able to cope with them.

Senator Maurice Hayes expressed concerns about decentralisation. The Minister for Finance, Deputy McCreevy, referred to what he sees as the very positive aspect of changing an element of the Dublin mindset although I know Senator Maurice Hayes is not a Dubliner. The mindset that obtains in the city is characterised by some negative views on decentralisation. Towns in my constituency and others which have been nominated to accept public servants regard decentralisation as a major cause of excitement and a boost to the local economy and the quality of life. It is not just a case of the extra money that will be available due to the additional salaries being earned in the towns.

Dr. M. Hayes: My point was that it would affect the quality of administration.

Mr. Parlon: There is no question that decentralisation will adversely shake up the Civil Service. It is a voluntary scheme. Not everybody will choose to move and some who move will have to acquire new skills. In the short term, this could cause some deficiencies which I hope would only be minor.

Decentralisation will also offer scope for people to move up the ranks. It will afford opportunities to some of the younger, more talented people who might not be afforded them otherwise. From my limited experience in Government, I find civil servants to be very dynamic and interesting and they are very enthusiastic about moving.

We have had sound management of the economy and investment in delivering output is very real. Since 1997, 8,500 people have been recruited on the medical side and while there have been criticisms, it takes time for services to be delivered. However, once one has the personnel, investment and hardware in place this will work out. There are 6,000 extra nurses in the system and that will have a positive impact on the health services. I also note the success of the treatment purchase scheme, which takes people off the long-term waiting lists. It has been very successful for thousands of patients.

I commend the Bill to the Seanad.

Question put and agreed to.

Bill reported without recommendation, received for final consideration, and ordered to be returned to the Dáil.