CURRENT Government spending is running £200 million ahead of target this year, according to the Minister for Finance, Mr Quinn. He has also warned that pay and other spending increases being sought as part of the new national agreement would, if granted, limit tax cuts.
With spending running well ahead of target this year, it is now clear that the carry-over costs of this additional spending into 1997 will limit the scope for tax reductions in the January Budget. However, tax trends remain buoyant and Exchequer borrowing is still set to come in well below target.
Mr Quinn's comments yesterday are a clear signal to the Cabinet that restraint is needed if he is to afford a generous Budget.
On public pay, overspending this year accounts for 15 per cent of the 1996 overrun and the increases demanded by the unions as part of the new talks would cost as much as £1.5 billion over three years, Mr Quinn revealed at Dail questions yesterday.
Responding to a question from the Progressive Democrats finance spokesman, Mr Michael McDowell, Mr Quinn said the increases demanded in public pay and other spending "would obviously restrict the resources available for taxation reductions". In response to a question from the Fianna Fail finance spokesman, Mr Charlie McCreevy, Mr Quinn said gross current supply spending is £200 million over budget this year. The increase in real spending (the level by which spending growth exceeds inflation) will be 4 per cent, compared to Budget estimates of 2.7 per cent, he said. At the end of September, Mr Quinn was indicating a real increase of just over 3 per cent.
Nevertheless, he insisted that public expenditure is under control. "The two biggest additions to my Budget provision for current spending, the EU disallowances and the BSE measures, were exceptional and unavoidable."
According to the Minister, intervention as a result of the BSE crisis will cost an additional £20 million, while garda pay and allowances for BSE-related duties on the Border could cost up to £25 million.
The EU disallowances, or beef fines, amount to £70 million - which is £20 million higher than Budget provision.
