Thursday, 12 December 2002
Seanad Eireann Debate
Minister of State at the Department of Finance (Mr. Parlon): I welcome this opportunity to address the Seanad on the Appropriation Bill, 2002. As Members are aware, the core purpose of the annual Appropriation Bill 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.
The Appropriation Bill, 2002 appropriates to the various services listed in the Schedule for the year ending 31 December 2002 the net sum of €29,341,108,000. The total amount comprises: the original net Estimates of €28,844,853,000 as approved by the Dáil prior to the summer recess and the net Supplementary Estimates totalling €496,255,000 which have been approved by the Dáil. The Bill also seeks approval for the use of departmental receipts amounting to €2,481,119,000 as appropriations-in-aid of the services listed in the Schedule. As I mentioned, the Estimates and Supplementary Estimates included in the Schedule to the Bill have been approved by the Dáil. The Bill seeks to give them formal legal effect.
The Supplementary Estimates do not convey the full story in relation to expenditure trends in 2002. It is anticipated that the additional pressures reflected in the Supplementary Estimates will be offset by savings elsewhere across the Votes. The recently published White Paper included a forecast outturn for 2002 which indicates that spending this year will be on or close to the target set. The provisional end-year outturn will be published as part of the end-year Exchequer statement on 2 January next.
The Bill also provides an opportunity to review the budgetary and economic position which I am happy to take today. The Government and the previous coalition has had an excellent track record overall in terms of ensuring public spending each year is managed within the approved allocation for the year. Between 1997 and 2001 the average variation between the level of spending planned in the revised Estimates volume and the end-year outturn was less than 1%.
The recently published abridged Estimates volume for 2003 and last week's budget have been framed in very different circumstances from those of previous years. Members will be aware that on budget day last year the projections for 2003 and 2004 signalled projected deficits for each of those years. Since this time last year the situation has become more difficult because of the unexpected continued weakness of the international economy. While Ireland may be an island geographically, it is certainly not an island in the economic sense. We live in a small open economy and cannot avoid the effects of the slowdown in world economic growth. The challenge, therefore, for us is to see what steps we can take to place ourselves in the best position to benefit from the international economic upturn when that occurs. The first priority is to get back to a sustainable rate of spending growth in order that it is more in line with available revenues. This does not mean a reduction in absolute levels of spending nor does it mean a low level of public spending given the levels of increase in recent years. However, it requires difficult decisions if we are to protect and maintain the economic gains we have made in recent years.
The recent budget measures announced will promote social well-being in society. The budget measures will enable continued economic progress by further developing our infrastructure, promoting equity in society and helping protect the weaker sections within it.
I will now briefly outline some of the detail of the Bill. Section 1 gives statutory effect to the departmental Estimates for supply services, including all Supplementary Estimates approved by the Dáil since the last Appropriation Act. The Dáil approved the original 2002 Estimates for departmental expenditure which totalled €28.8 billion prior to the summer recess. Since then it has approved a number of Supplementary Estimates for various Departments totalling €496 million. This extra amount brings the net total grant for supply services expenditure in 2002 to over €29 billion or nearly €32 billion in gross voted spending. Section 1(1) appropriates this total net amount of €29.3 billion to the various supply services for Departments and Offices as listed in the Schedule. In addition, section 1(2) provides for the application of a total amount of €2.48 billion in departmental receipts as appropriations-in-aid of the grants for the supply services of those Departments and Offices.
I will now outline the main factors which have given rise to the additional expenditure and the requirement for the Supplementary Estimates this year. The total amount of €496 million can be broken down as follows: health and children –€210 million; transport –€100 million; education and science –€91 million; justice, equality and law reform –€28 million; and other sectors –€67 million. The areas of health, transport and education account for €401 million or 80% of the total amount of the Supplementary Estimates.
The following are the main factors giving rise to the extra allocations in these areas. In the area of health and children, the net additional cash requirement is €210 million, including a shortfall in appropriations-in-aid of €41 million. The gross additional spending requirement is €169 million, of which €12 million is for capital and €157 million for current spending.
There is inevitably a degree of uncertainty in forecasting the actual costs of demand-led schemes and, therefore, the original Estimates may not provide fully for these costs. This year an additional €183 million is required for these schemes. The cost of the general medical services scheme has risen significantly in the current year. Increased costs are arising as a result of a number of factors, including the decision to grant medical cards to the over 70s and some inaccuracies in the databases in relation to cardholders. The rising cost of drugs within the GMS scheme is also having a significant impact.
An additional sum of €10 million is required for compensation payments and legal costs associated with the compensation tribunal to compensate persons who have contracted hepatitis C from the use of anti-D blood products. In addition, funding of €8 million is required under the heading of community drugs schemes.
Allowing for offsetting savings and corrective measures in relation to health spending taken earlier this year, there is a net requirement of €157 million in respect of current expenditure. In relation to capital expenditure, allowing for savings elsewhere, a total of €12 million is required for amalgamation works at Cork University Hospital and refurbishment works at the Royal Hospital, Donnybrook.
The Vote for the new Department of Transport requires a net Supplementary Estimate of €100 million. The gross requirement was €126 million which was offset by savings of €26 million. The main item is significant additional funding on road maintenance and improvement. The Government has devoted considerable resources to the national roads programme with investment of approximately €2.62 billion over the period 2000-02. The unprecedented level of activity has resulted in higher than anticipated levels of expenditure in 2002 which has necessitated a Supplementary Estimate this year of €125 million in respect of grants payable to the National Roads Authority. The bulk of the additional expenditure arises on schemes in progress or now completed and public-private partnership schemes at tender stage.
With regard to the Department of Education and Science group of Votes, substantive Supplementary Estimates for the first and second level education Votes and a token Supplementary Estimate for the third level Vote are required in 2002. The net amounts sought for each Vote are as follows: Vote 27, first level education –€47 million and Vote 28, second and further level education –€44 million. The total required is €91 million.
These Supplementary Estimates arise mainly for the following reasons. An additional €12 million is required to pay for additional resource teachers and part-time teaching hours for children with special needs. An additional €16 million is required to provide for the salaries of full-time special needs assistants employed in the primary system to support children with disabilities.
An additional €19 million is sought for the capital funding of primary schools. This sum is needed to continue the process of addressing substandard accommodation in primary schools. The Government remains committed to continuing the work it has commenced and consolidate the substantial progress made to ensure the needs of schools throughout the State are met over time.
With regard to second level and further education, a Supplementary Estimate of €44 million for Vote 28 is required because receipts from the European Social Fund projected to be received by the Department of Education and Science as appropriations-in-aid in 2002 are lower than that provided for in the original 2002 Estimates. Vote 29, third level and further education, requires a token Supplementary Estimate amount of €1,000.
An additional €600,000 is required to meet extra expenditure incurred by the Dublin Dental Hospital in respect of pay and superannuation. Government accounting regulations require that a technical Supplementary Estimate be sought for any additional amount, even though there are sufficient savings on other subheads within the Vote to meet the extra expenditure.
An additional €28 million was allocated to the Department of Justice, Equality and Law Reform as follows: €8 million to the Garda Vote, which is being funded by savings from the departmental Vote, and €20 million to the prisons Vote relating to pressures on overtime. In 2002 the cost of overtime was almost 30% of overall pay costs for the service. Existing agreed staffing arrangements mean that, in particular, it has been necessary to resort to overtime working to cover prisoner escorts, staff leave, staff training, sick absences and staff shortfalls.
The Minister for Justice, Equality and Law Reform has made the continuing level of prison overtime a top priority issue for his Department. Officials of the Prison Service have been engaged in a detailed exploration of alternative working arrangements for the operation of prisons and places of detention and are finalising the details of a draft package or framework of proposals for such change on which to consult with the staff side. While it is intended that there will be an impact from the implementation of the package of measures in 2003, much will depend on the pace of the negotiations with staff interests.
With regard to the courts Vote, a Supplementary Estimate of €1,000 was introduced to allow the transfer of additional appropriations-in-aid receipts to expenditure subheads. A Supplementary Estimate of €15 million was provided for the Department of Agriculture and Food to compensate for a shortfall in EU Structural Funds.
Net additional funds of €107,000 were approved for the Vote for the Houses of the Oireachtas and the European Parliament. The need for a Supplementary Estimate arose in respect of the legal and other expenses relating to the sub-committees of inquiry into the Abbeylara incident and the mini-CTC contract and the higher than anticipated number of former Members not returned following the general election. This led to the payment of severance and termination payments and pension liabilities.
The Central Statistics Office was granted an additional €1.1 million. This sum was made up as follows: €714,000 arose due to a shortfall in the appropriations-in-aid subhead while €387,000 arose in an administrative budget subhead relating to expenditure on the census of population 2002.
The Department of Enterprise, Trade and Employment required a sum of €12.5 million to provide Nítrigin Éireann Teoranta with the funds which the two shareholders in Irish Fertiliser Industries, namely, ICI and the State, acting through NET, have agreed to provide for ex gratia severance payments to former IFI workers.
A Supplementary Estimate of €30 million was required for the Department of Arts, Sport and Tourism. A sum of €20 million was granted to provide financial support for the GAA and the FAI in respect of specific capital developments. An additional sum of €3 million was granted to enable the Irish Sports Council to provide financial support for the IRFU towards the development of rugby and €7 million was granted to provide for commitments to the aquatic and leisure centre at Abbotstown, which will be completed in time for the 2003 Special Olympic World Summer Games. Supplementary Estimates of €8.5 million were provided for the Office of Public Works for humanitarian aid for victims of severe flooding.
I refer to section 2. 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, that is, by 31 December 2002 in the case of the Financial Resolutions passed on budget night, 4 December 2002. However, the Article also allows for the end-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 2002. The section makes provision for this deferment to be invoked. This provision 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.
In commending the Bill to the House I reiterate that the level of funding provided by the Government in 2002 builds on significant investments made since 1997. This is indicative of the Government delivering on its commitment to improve priority public services and invest resources wisely.
Mr. Higgins: I welcome the Minister of State. The convention is that the Appropriation Bill is nodded through the Dáil and debated in the Seanad, but a debate is needed this year more than ever on the state of the public finances and the expenditure of public funds over the past 12 months. That is the reason I am glad we have a brief opportunity to debate the legislation. It should have been entitled the Misappropriation Bill, 2002, because the economic performance of the Government and its predecessor is ample testimony to the misappropriation of public funds in recent years.
Last year's Bill appropriated a sum of £25,855,285,000 and while this year's will appropriate €29,341,108,000. This represents a whopping increase of €3,486 million or 5% on last year's figure. Last year in his Budget Statement the Minister for Finance, Deputy McCreevy, acknowledged that current spending during his terms of office had increased by 79%. What an admission from a Minister who on taking office stated there would be a rigid cap on public expenditure, an increase of not more than 2% above inflation, yet after five years expenditure had increased by 79%.
Instead of acknowledging that his target was not valid, the Minister made absolutely no apology for the massive escalation in the expenditure of public finances and, instead of putting on the brakes, he indulged in a reckless spending spree, squandering a €4.8 billion surplus and plunging us into deficit budgeting, like the old days. However, 2001 was an election year and it was a case of power at all costs, irrespective of what damage would be done to the public finances.
This was done by a Minister who earned universal praise in the late 1970s and early 1980s for courageously standing up to the then Taoiseach, Charles Haughey, following his famous belt tightening television address to the nation in which he preached the need for fiscal rectitude and so on. Mr. Haughey was taken on by the Minister, then a Government backbencher, and told this could not happen. He won universal praise but what a shameless capitulation and betrayal by the Minister who set out his stall last week as a pioneer of fiscal rectitude.
Last year two reasons were advanced for the escalation in public expenditure, one of which was domestic and the other international. The domestic reason was the impact of the restrictions imposed as a result of the foot and mouth disease outbreak, especially in the food, tourism and transport sectors. That excuse no longer pertains. The foot and mouth disease crisis was thankfully brought to a successful conclusion in 2001 and I commend the Minister for Agriculture and Food for that. The international factor was the events of 11 September. While it continues to overhang, its impact is nothing like as severe as it was last year.
It has been repeatedly said and agreed by international commentators that the real reason for the crisis in the public finances is mismanagement by the Minister. In the debate on the Budget Statement I said the economy is fundamentally sound. The nuts and bolts are in good order. The mismanagement of the public finance has created the present crisis.
The shock that greeted the publication of the Book of Estimates served as a late reminder to the public of the pup sold to it by the Government in the run-up to the general election. During the three week election campaign the Minister and his colleagues repeatedly assured the media and the electorate at their daily press conferences that there would be no cuts or tax increases and that the public finances were in good order. The reality broke with the publication of the Book of Estimates. The public saw that the Government commitments, given so loquaciously during the election campaign, were in shreds.
Capital investment in education is to be cut by 4% at primary level, 10% at secondary level and a massive 29% at third level. When a Government starts to cut spending in education it cuts the legs from under one of the pillars on which the Celtic tiger was constructed. In previous times, when the economy was in bad shape, we prided ourselves on increasing expenditure in education. It paid a rich dividend. We gave people an opportunity to travel abroad and secure a decent living in the international marketplace.
Jobs sponsored by FÁS and in the public service are to be cut by 5,000. Enterprise Ireland grants are to be cut by 38% and the first-time buyer's grant is abolished. The Minister of State referred to the additional cost of extending medical card provision to those aged over 70 years. There was no mention of the unequivocal commitment that in its first year in office the Government would provide an additional 200,000 medical cards. Grants to Bord Fáilte have also been cut.
Over the past couple of months there have been, in effect, five budgets. The first occurred on the eve of the publication of the Book of Estimates when the threshold for the drugs refund scheme was increased from €65 to €70 per month. The second was the Book of Estimates and the third was the Budget Statement on the 4 December. Despite the pledge that there would be no increases in taxation, the 1% increase in the lower rate of VAT will badly affect first-time buyers, who have already lost their grant and will now have to pay up to €6,000 more for a house. The €10 increase in the old age pension will be wiped out by the additional cost of fuel, electricity and transport. The 10% increase in social welfare payments will be reduced by the projected inflation rate of 6%. It will erode the living standards of the poorest sectors of the community.
The fourth budget, the 12% increase in road tax, was introduced by stealth last week. This is an addition to the increase in excise duty on diesel and other motor components. The fifth budget was introduced yesterday in the form of the increase in the television licence fee for RTÉ.
The economy is in good order but it is beginning to slip. The Minister of State referred to the compensation payments to the IFI workers. They were dumped on the dole overnight without warning because of the failure to negotiate a deal with An Bord Gáis. The announcement yesterday of the loss of 250 jobs in Roscrea at Miza pharmaceuticals will mean a loss of €10 million per annum to the economy of the Roscrea area.
The budget and the Estimates are very damaging. They will contract the economy, increase costs and make us less competitive. They will also jeopardise benchmarking and make a new national partnership agreement, crucial to the well-being of the economy, almost impossible to achieve. The Fianna Fáil Party slogan during the general election campaign read, “A lot done, more to do”. The verdict is that a lot of damage has been done and there is a lot more damage to do.
Dr. Mansergh: I welcome the opportunity to debate vigorously with Senator Higgins the state of the public finance. The Appropriation Bill is formal legislation which provides legal authority for spending during the year, not only the original Estimates but also the Supplementary Estimates. Referring to a Supplementary Estimate of €500 million, the Minister of State said this is a gross rather than a net figure and the expectation of the Minister and the Department is that spending will be on target. That is a good achievement in a general election year. It defies the predictions of the political and media critics. Senator Higgins referred to the Minister's earlier career. In the election year of 1981 public spending was considerably above target.
I am pleased to see the signs that public spending is on the rails. It is not out of control, nor are the public finances in crisis. The projected borrowing requirement for 2003 is 0.7% of GDP and the debt to GDP ratio is 34%, the second lowest in the European Union. We need a sense of perspective. Despite the urgings to the Minister that he should borrow considerably more, I am pleased he is being reasonably conservative. He wants to keep the country well away from any kind of financial precipice. Nobody knows how long the difficult economic conditions will continue and it is right that great prudence is being exercised.
In my capacity as an adviser I helped to formulate the financial targets set out in the Fianna Fáil manifesto in 1997. It was stated expenditure would increase by 4%. Senator Higgins is correct, this was meant to be a 2% increase in real terms, the purpose and spirit of which was to ensure we got into surplus which we achieved beyond any of our wildest dreams. The previous Minister for Finance, Deputy Quinn, was not committed to getting rid of current budget deficits. Many on the Opposition benches and equally on our own were of the view that we should use the new financial freedom to tackle many of the problems facing us more speedily.
There was a debate in this House last night about schools and I applauded the Opposition for bringing forward the motion. The issue of school building has a very high priority. An extra €19 million has been given since last April. There were very few voices saying the Minister should hold on to even more of the surplus of €2 billion or €3 billion. That would not have been politically reasonable.
We should regard the last five years as a unique period in Irish economic history that is unlikely to repeat itself in the future. We certainly will not have 10% growth rates as we had at their peak in 2000. We introduced programmes in every area to start tackling the problems facing us. There has been talk of cutbacks in respect of which I do not wish to go over figures and percentages. Senator Higgins has acknowledged that there has been a huge increase in public expenditure. Even gross expenditure will rise next year when current expenditure will rise by nearly 9%. There are no cutbacks, just plusses and minuses, depending on what one is looking at. That is always the case. In terms of further increases, we are on a plateau and will have to mark time. That could be the case for perhaps two or three years. It is very difficult to predict the future, but, at least, we are operating at a far higher level of expenditure than in 1997.
Senator Higgins raised the issue of pensions. The last Government's record was particularly good. I was glad to see that pensioners were given first priority. When Fine Gael took office after a number of years with the Labour Party and Democratic Left, there was only a 2.5% increase in pensions. I do not think the Government or the previous one deserves to be lectured on the subject. Pensioners fell back after the 1980s because there was an unwillingness to give them priority. Even today certain bodies are talking about pensioners as if they were the deserving poor and others the undeserving poor. They are, technically, attacking the priority given to pensioners. We should not apologise for giving them that priority.
Because there is no increase in overall budgets in the current situation there is an opportunity to look closely at expenditure control within Departments. Inevitably, when there are rapid increases in expenditure, a little tends to be wasteful. I know of a couple of instances in the semi-State sector in recent days. It has cost €250,000 to send train drivers by taxi to Longford. This morning there was a report of a Christmas trip to New York by 24 executives. There may have been justification for some of them going, but one wonders whether as many as 24 needed to travel, even though New York is very nice in December just before Christmas. It raises the question of whether the Comptroller and Auditor General should examine State agencies and semi-State bodies as well as Departments. I am firmly convinced that there is scope for economies within budgets and without loss of service which will increase the efficiency of spend. We must avoid the use of extra bureaucrats and artificially increasing work because it creates no real saving.
I support the Bill. Public confidence in the management of the economy and public finances is improving. When the Government was elected, everybody knew there were more difficult times ahead. It was elected to keep the economy on the rails. This means there must be sound public finances and the maintenance of full employment or an unemployment rate of about 5%. We must generate the resources needed for the many pressing social and infrastructural needs which I do not deny are evident. The foundation is that we keep the public finances sound. I am satisfied that after six months that is the intention of the Government.
Mr. McDowell: While I am reluctant to get involved in an argument with Senator Mansergh, I suppose I should. The bottom line is that the Government has not been so much responsible for financial mismanagement as cynical financial manipulation of public expenditure. What we got during the previous five years was an unreasonable constraint on spending because of the 4% target to which others referred. We should have been investing more in the circumstances. This was followed in the last two years by a splurge in spending which was entirely motivated by the point we were at in the electoral cycle. It was entirely motivated by the Government's need to spend more money so as to be re-elected. That has now been followed, in turn, by the grossest deception of all – a complete betrayal of what the Government seemed to indicate to the people during those days in May when it was re-elected.
While I accept that there was, and still is, appreciation that matters were not as good as they were, there was certainly no appreciation that the Government was going to turn on its head everything it had been saying for the previous while and everything it had been doing for the previous two years. The Government has cynically manipulated the public finances. It is quite remarkable that, despite this fact, we are still not in a what one might term a crisis position. Much of the current “crisis” is of the Government's own making because of certain deliberate decisions it has taken and to which I referred during the budget debate and will not repeat now.
In the short time available to me I want to talk specifically about the issue of health and the very dry issue of value for money. I was struck when reading the report from the three wise men by some of the language and analysis contained therein. I acknowledge that the terms of reference were tight and that they were asked to do a particular job by the Department of Finance. All three are ex-Department of Finance officials and come from a culture which regards public spending as not being particularly good. I doubt if they were all that upset by being asked to cut it by €900 million.
Some of the detail in the report is quite insidious and pretty dangerous. In their comments on health, they state lower capital provision will reduce pressures for increased revenue spending in the medium term. To put it another way, this means that if we do not invest in beds, we will not have to pay nurses to care for the patients who might use them in a few years.
In a few trite, unopposed paragraphs, these people – who clearly have the ear and no doubt the confidence of the Minister – are, in effect, overturning what we understand to be Government health policy. Eighteen months ago, the Government made much of a document entitled “Equality and Fairness”, at which I looked again this morning and which is a decent attempt by the Department at assessing the needs in terms of public expenditure and investment in the health service for the next ten years. This document sets out in substantial terms what it regards as being the needs – in terms of extra beds, manpower, day places, rehabilitation facilities, etc. – for the next ten years and then states it will cost £10 billion to meet those needs.
What I am getting at here is that the Department of Health and Children, no doubt with the political imprimatur of the Taoiseach and, albeit it reluctantly given, that of the Department of Finance, compiles many wonderful reports. For example, there is a report on primary care, entitled “Acute Hospital Bed Capacity” and another which deals with medical manpower and produces a plan of sorts for the next ten years which has a great deal to be said for it.
The three wise men, who were appointed by and have the ear of the Minister for Finance, have now produced a report which, in two or three trite paragraphs, effectively dismisses the Department's reports and says that capital expenditure in the health services is bad because it will produce current pressures a few years down the line. The latter is self-evidently true.
I am an old-fashioned tax and spend social democrat. I believe that we should tax in order to fund better public services and that much, although not all, improvement requires additional public expenditure. I am persuaded by the arguments in the health strategy, for example, that it can only be done if you spend considerably more money. I am persuaded – nobody can argue with this – that we will only get better infrastructure, whether it is roads or public transport, if we spend, by and large, a great deal more public money. I am not saying that there cannot be improvements without spending money, but there are many important improvements which will not come about unless we spend more money.
There is a responsibility on people like me, who take the view I have outlined, to explain to people that spending more money means the provision of better services. To provide such services, we must change our approach to budgeting and to the evaluation of value for money within the public service. Traditionally, there has been – I think we borrowed it from the British who have, at least, being trying to move away from it – an almost exclusive focus on inputs and on money spent. For example, when the Department of Finance consults the various other Departments as part of the Estimates process, it basically says they can spend an additional 4%, 10% or whatever and there is no actual concentration on what will be obtained in return. The Department does not say that what it wants to do this year is produce 300 more beds and that this will cost a particular amount. It does the reverse and informs the Department of Health and Children, for example, that it will obtain a certain amount of money and will have to work out how many more beds it can provide on foot of this. There is no concentration on results.
Other countries have the same problem and they have tried to tackle it. In Britain, the Chancellor, Gordon Brown, has spent much of the past five years trying to tackle it, with mixed success. He has had some success and some failures. There is no question that a great deal of refinement is needed. Other countries such as New Zealand, in a radical way, and some of our European neighbours, in a more conservative manner, have tried to do the same. However, Ireland has not yet taken the first step.
Part of the reason has to be that the Minister is inimically opposed to the whole idea of spending money if it cannot be spent in any event. That causes a problem because it means that he reacts to everything in a purely political way and there is no idea of planning ahead.
It is clear that multiannual budgeting is required in certain areas. To a degree, the Department went through the exercise of trying to use multiannual budgeting for everything a number of years ago before basically abandoning the concept. In some cases it simply does not work, but there are some budgets which clearly have to be done on a multiannual basis. The budget for the roads programme immediately comes to mind. Multiannual budgeting for overseas development aid was quite successful until it was abandoned earlier this year. Health spending and improvement of health facilities is another area where multiannual budgeting is required.
We need to know in advance how much we will be able to spend. The various authorities must be in a position to plan two, three or four years ahead, safe in the knowledge that they will actually have the money to spend. It is simply not sufficient, and hopelessly wasteful, to work in a stop-go fashion. We have clearly done so in respect of the roads programme and the worst possible example of the results of such a policy have become evident this year.
The Department of Finance – I believe in 1997, under the then Minister, Deputy Quinn – initiated what was meant to be a rolling process of expenditure reviews, when each of the programmes of Government was meant to be considered in turn and we were meant to evaluate whether they were actually meeting the targets we had set for them. In practice, it quickly ran into the ground. Without going into detail, I and many others have come to the conclusion that one simply should not ask the Civil Service and, in particular, the Department of Finance to evaluate expenditure programmes. It is simply not possible to do this for various cultural and other reasons involving the way the Department of Finance relates with other Departments. It could not be done fairly and one would not get a reasonable result.
We need a unit, possibly within the Civil Service but external to the Department of Finance, to carry out such evaluations. A unit of that kind was established to deal with EU Structural Funds and it has, broadly speaking, worked well. We need a value for money unit – it could perhaps be called a “valuation unit”– which will look at selected items of Government expenditure in an organised way to see that we are actually getting the value for money.
We also need to change the Estimates process. The Minister referred to this earlier and in the debate in the Lower House. Progress will be made if we know, for example, how much money is meant to be spent. We know what is the pattern of spending over the course of a year, but the system needs to be much better than that. Before their Estimates are agreed, Ministers must come before the relevant committees of the House to indicate the purpose for which money is required. In addition, at the end of each year they should return and outline on what they spent the money in order that there is some way of assessing what we are getting in return for the monumental sums we are spending on behalf of taxpayers in any given year. Such a process does not really exist at present. The Estimates process is conducted almost entirely in private and by the time the Houses have the opportunity to consider them, the money is either totally committed or, more probably, largely spent. The exercise, therefore, becomes virtually academic and attracts little interest.
We are spending a great deal of taxpayers' money. I believe we need to spend a good deal more taxpayers' money in order to improve public services. However, as a tax and spend social democrat, I acknowledge that there is an urgent need for us to improve the way in which we evaluate how money is being spent. We must ensure that it is spent in a manner which paves the way for consequent improvements in public services in the future.
Mr. J. Walsh: Senator Mansergh's point, that it is extraordinary – particularly in light of many of the prognostications of various commentators over the year about the way it was running well ahead of estimates – that public expenditure will come in pretty much on target is well made. That is a fair achievement, given the current situation and the fact that, as Senators Higgins and Mansergh stated, that an election was held in June. At elections, politicians usually tend to be more liberal in their spending than would otherwise be the case.
Since 1997 there has been a significant increase in public expenditure, across the range of Departments and public services. Much of that additional expenditure was required. Health spending has increased by in excess of 120% and education spending has increased by in excess of 70%. There have been significant increases is social welfare spending to the disadvantaged sector of the economy. There has been increased investment in infrastructure, which was badly needed as a result of the deficit in this area. Investment has increased across the board.
I understand why Senator Higgins and others – who are probably haunted by the ghosts of the 1980s when the profligacy of the relevant Government doubled the national debt from £12 billion to £24 billion – are homing in on this particular topic. I support what Senator McDowell said regarding value for money. In many instances we may be getting value for money, but across a range of services we are not getting it.
Anybody who has worked in the private sector will recognise that that in a large or small organisation – the larger the organisation, the more pronounced the problem – the issue of waste inextricably enters the framework of expenditure. The element of competition in the private sector forces people to address that issue from time to time.
Given the significant increase in public expenditure over five years, there is now a need, as Senator McDowell suggested, to embark on a root and branch analysis of public expenditure across all areas, particularly that of current expenditure. There is also a definite need for such an analysis in the capital area. I accept, however, that matters should be much easier to resolve in this area. We need to inject competition, particularly into the area of construction and other areas, to ensure that value is obtained.
Tackling current expenditure will be more difficult because of the vested interests in many areas. One would have imagined five years ago that a spending increase of 120% on health would have produced an obviously improved service, but we must concede that has not been the case. In many instances, people do not see any significant improvement, certainly nothing commensurate with the expenditure increase. We have a good health service but significant waste.
The Minister of State mentioned the increased expenditure on the GMS. General practitioners got concessions they probably should not have got in negotiations. It is not just GPs, look at what consultants are earning. When we had local health committees, I recall arguing with consultants that much of their revenue arose on the public facilities they were able to utilise to generate private income and for which I contended that there should have been a charge. In many instances, I contend that the services provided by the State are the biggest contributor to their potential earnings through private fees.
Money provided for local government for improved services has been used to fund salary increases, with no corresponding improvement in services to the public. Local authorities drawing up estimates will see that the increase in administration costs has been enormous and absorbed much of the increased expenditure. On transport, while canvassing during the general election I was told that authorities were making their sixth attempt at getting traffic calming measures right in one village. Costs were written off on the five previous occasions. We are looking at providing a new route from one of our major ports that will run alongside another road constructed within the last 15 years. The Moone bypass will be replicated by a new dual carriageway. While the new motorway is badly needed, it raises question marks about the logic of some of the investment decisions being made.
The Government has demonstrated a capacity to manage the national debt well by establishing the National Treasury Management Agency. We now need – with some private sector input – a similar body to ensure all public expenditure, particularly current expenditure, comes under scrutiny. As I know from experience in business, no matter how efficiently any organisation is run, it is not difficult to identify savings of up to 10%. If such a process was engaged in even more forcefully across the public sector, the savings would probably be nearer 20%. That would release much needed resources to be applied more productively elsewhere. I hope the Government will prioritise this process in the coming year to ensure the significant amount of taxpayer's money rightly invested in public services will yield the best return.
Minister of State at the Department of Finance (Mr. Parlon): This is a technical Bill. While it deals with very dry stuff, it must be dealt with to give statutory authority to the appropriations voted on. I thank all those who have contributed on both sides of the House. The common sense shown and civility of the contributions in this House stand in contrast to some of what I have experienced in the other House.
Mr. Parlon: I do not want to encourage that. Senator Higgins referred to misappropriation. I am very proud, however, to be part of a Government and a Department of Finance that has spent €29 billion in the last year. In spite of this, we should take note of common sense points about getting value for money, an absolute priority of every Minister and Department.
There has been much hype all year about spending being out of control. The Government budgeted for a 14% expenditure increase and the Minister for Finance, Deputy McCreevy, said all along, to the disbelief of the Opposition, that he would stay within budget. The actual overspend in the Estimates is 1.7%. This does not take into account savings that accrued across Departments. When included, the overspend is a mere 0.2%. It would be very difficult to achieve greater accuracy, particularly given the pressure to fund demand-led schemes. The bulk of extra expenditure was incurred in the Departments of Health and Children and Education and Science.
I recently brought my own Supplementary Estimate for the Houses of the Oireachtas and the European Parliament before the Committee of Public Accounts. One of the headings under which there was extra expenditure was severance and termination payments. I am thankful that the Department of Finance was not entirely accurate in predicting the outcome of the general election. It predicted an average turnover for both Deputies and Senators. In fact, we have 55 new Deputies. As 55 Deputies either moved to this House or left altogether, termination and pension liabilities, therefore, increased. I think we have 35 new Senators, ten of whom moved across from Dáil Éireann. That is one area where the Department did not quite match its financial expertise. I probably would not have featured in its reckoning.
Further debates on the budget will take place in the other House tonight. Going forward we must tailor our expectations to the tighter economic situation being experienced both here and globally. There has been much criticism of cuts made in the budget, but the Opposition has been very slow in saying where the Government should have made cuts. Very difficult and courageous decisions were taken, from some of which I have suffered in terms of running my Department. Despite the intense paring of the Office of Public Works's budget by the three wise men and my Department, I had to find an extra €5 million for humanitarian aid to deal with the fall-out from the recent floods and it may not stop at that. All this must be taken account. It is impossible to budget in advance for floods or humanitarian aid.
I appreciate the opportunity to participate in this debate and I am happy that my Department has been as accurate as possible in terms of the appropriations, Estimates and savings made. Clearly, the savings made cannot be included in the Estimates, but we are reaching our target. At the end of the year we will be as near as makes no difference to the target set out. It must be difficult for anybody to find fault with this.
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