Michael Ring (Mayo, Fine Gael)
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Question 240: To ask the Tánaiste and Minister for Health and Children the reason it cost €200 million to establish the Health Service Executive which included paying off debts of the former 11 health boards; and if she will make a statement on the matter. [3078/06]

Mary Harney (Dublin Mid West, Progressive Democrats)
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It should be noted from the outset that the establishment of the Health Service Executive did not cost €200 million. Owing to the creation of the HSE's Vote and the consequent introduction of vote accounting procedures, it was necessary to make some technical adjustments at Revised Estimates time in 2005 to accommodate this process. Furthermore, none of these technical adjustments required additional investment in the health services by the taxpayer.

The first of these technical items related to the liquidation of health board approved overdrafts. Up to the end of 2004, an overdraft facility was approved as part of the financing of the health service. Health boards had been cashed with approximately 91% of their approved expenditure in the current year, with the balance of approximately 9% paid over in the following year. This recoupment rate was agreed between my Department and the Department of Finance in 1993-94 as being the appropriate level of cash funding in any year which, when taken together with an approved overdraft facility, ensured that the health boards had enough cash in any year to meet the cash commitments arising from spending their approved allocation. Vote accounting precludes the use of overdraft facilities and, therefore, once-off Exchequer cash of €122 million was required to replace the bank financing previously available. This allowed the Exchequer to meet that portion of its liabilities in 2005 previously covered by way of an overdraft facility.

The second technical adjustment required was in respect of statutory and voluntary deductions made in December 2004. With the establishment of the HSE in January 2005 it was necessary to make a total of 12 payments to the Revenue Commissioners and other beneficiaries in respect of each month's statutory deductions from health board employees' salaries and voluntary deductions such as life insurance. Unlike accruals accounting, Vote accounting required that these deductions were accounted for in Vote spending for each month from January to December 2005, that is, in the month they arise, even though the December 2005 deductions were not due to be paid over until January 2006. Therefore, the HSE was obliged to charge each calendar month of 2005, as well as the deductions from December 2004, to the newly established Vote 40, resulting in 13 months' deductions in 2005. This required a provision of once-off funding of €94 million from the Exchequer in 2005. In total, the establishment of the HSE's Vote required a provision of €216 million once-off funding.