The Government's spending Estimates, published yesterday, provide for big increases in spending on roads, housing and transport next year, paving the way for the seven-year National Development Plan to be announced next Monday. Government capital spending is to rise by 25 per cent on this year - topping £3 billion in 2000 - and further large increases are expected in subsequent years as part of the plan.
The annual Estimates also show substantial increases in spending on health and education, largely due to a rising pay bill. The health budget will top £4 billion, allowing for the recruitment of 3,000 extra staff.
Presenting the spending plans yesterday, the Minister for Finance, Mr McCreevy, was asked why queues for health services appeared to be getting longer, despite increased recruitment in the health services and higher spending.
"I've often asked that question myself," he said, before warning of future pressures on health spending as the population ages.
Pay and pensions funded by the Department of Health will rise by 9 per cent - the same as the average rise throughout the public service. More significant rises are recorded for the Garda (23 per cent) and the Department of Justice (17 per cent).
The 2000 spending Estimates show that the State payroll will absorb almost two-thirds of next year's rise in current spending. Highlighting a key issue in the talks on a new national agreement, Mr McCreevy warned that the current method of determining public service pay rises can no longer be sustained. The public pay bill will rise by almost 9 per cent next year to more than £6.6 billion. Mr McCreevy said yesterday this was not sustainable and "leapfrogging and special claims" by groups of public sector workers would have to stop.
Signalling support for the introduction of performance-related pay in the public service, Mr McCreevy said this offered the best, "if not the only", way of reconciling public servants' pay aspirations with the responsible management of the public finances and demands for better public services.
The Exchequer will spend £16 billion next year - 10 per cent up on this year - with £13 billion of it on current day to day spending and the remaining £3 billion going on capital projects.
The 25 per cent rise in Government investment spending reflects the forthcoming fall in EU funding and the prioritisation by the Government of development of the State's infrastructure.
Mr McCreevy said the substantial increase in capital spending was to "remove the bottlenecks which are beginning to act as a brake on economic growth".
The substantial rise in capital spending includes a 53 per cent rise in spending on housing to £759 million; spending on roads rising by 32 per cent to over £1 billion for the first time; spending on public transport more than doubled to £350 million; and capital spending on education up 73 per cent to £413 million.
Mr McCreevy said yesterday he was sticking to the Government's own ceiling of 4 per cent on the annual rise in current spending. However when savings in debt servicing costs, due to low interest rates and the effective rescheduling of part of the debt are taken out, the rise in current spending on running public services is almost 7 per cent. Emphasising the continuing strength of the State's economic performance, Mr McCreevy predicted a Budget surplus next year "likely to be the largest on record" despite the increased spending. A generous Budget is now expected next month, with the Government able to afford tax reductions of £800 million, as well as substantial increases in welfare spending. This will still allow Mr McCreevy to target a surplus of revenue over spending next year of more than £2 billion. He is expected to cut both the top and standard income-tax rates as well as giving large tax reductions to the less well off through increasing tax allowances.
Fine Gael's finance spokesman, Mr Michael Noonan, last night criticised specific allocations within the Estimates. He also said that of the £825 million increase in current spending, just £109 million was for real non-pay-related new projects.
Labour's finance spokesman, Mr Derek McDowell, said it was illogical of the Government to insist on remaining within its 4 per cent limit on rises in current spending. "This will restrict growth in the economy and the quality of our services will remain hugely inadequate."