ESTIMATES SUMMARY: The 2 per cent Estimates increase is really a 2 per cent cut when inflation of 4 per cent is taken into account, writes John McManus
The Government has set itself the ambitious target of holding down the increase in core Government spending next year to 2 per cent.
To get some idea of how difficult this will be, it is worth considering that this time last year, the Minister for Finance set himself a 10 per cent target which he is currently exceeding by 9 per cent.
However, if he hits his target next year, the net cost of running the Government machine will rise from from just over €29 billion to to €29.6 billion. This figure does not include spending measures to be announced on Budget day covering social welfare and public sector pay.
The Budget day measures will push the overall figure up to something nearer 6 per cent, according to most economists. However, the figures published yesterday remain the best guide to how much the Government will be spending on services and investing in infrastructure.
In real terms, the 2 per cent across-the-board increase equates to a cut of the same magnitude because inflation is expected to be 4 per cent next year. The final outcome could be even worse as the Government is assuming that it will hit its spending target for this year.
Mr McCreevy said yesterday he expected growth in spending this year to be 14.5 per cent, only slightly above the revised estimate of 14 per cent made last March. This would represent a considerable achievement, given that spending in the first 10 months of the year is 19 per cent ahead of the same period last year.
A massive deceleration in government spending over the last few months of the year will be required for the 14.5 per cent growth target to be met.
Not surprisingly Mr McCreevy was keen yesterday not to accept complete ownership of the prediction that the 2002 target would be met. He pointed out that this assessment was based on information provided by the various "line departments".
If the target is not met - as seems likely - the base against which the 2003 Estimates are measured will be higher. As a consequence the cuts will seem deeper and the increases more miserly.
As it stands, only 20 of the 43 arms of Government which are covered by the Estimates have been granted an increase. Of these,only 12 have been given a increase which is in excess of next year's predicted rate of inflation.
Only three of the 12 can be considered areas of Government spending which directly affect the public. They include first- and second-level education - which have been granted allocations of 8 per cent and 5 per cent respectively. However, third-level education has seen its allocation cut by 2 per cent.
Overall, the education vote - which also includes other spending by the Department - is only up by 3 per cent to €5.6 billion.
Health and Children has been granted a 6 per cent increase to €8.9 billion, but as the health lobby has pointed out, this should be measured against health services inflation of 10 per cent and more.
Education, health and social welfare are the three areas to which the Government says it has given priority. Social welfare will get 27 per cent of the pie being carved up yesterday. This comes to €9.7 billion, representing a 3 per cent increase on next year, although this figure will be augmented by the Budget day increases in measures such as pensions.
Health's share of the spoils is 25 per cent, followed by Education with 15 per cent.
The other areas of Government spending which received above-inflation increases are votes such as the secret service - up 85 per cent - and international co-operation - up 10 per cent. Spending in these areas is relatively small and even minor increases can result in large percentage gains. In total they amount to less than 5 per cent of Government spending.
One large area of spending which will increase at more than the rate of inflation is Civil Service pay. The wages bill for the public sector will rise by 6 per cent next year to just over €12 billion or just under one in every €3 spent. The increase represents the full year cost of pay increases granted last year and other measures.
It does not take into account any pay increases which might be granted next year or the cost of implementing the €850 million of benchmarking payments which have been agreed but not yet provided for.
Some 31 arms of Government - ranging from the National Gallery to the Department of Agriculture - have had their budgets cut directly or else been allowed increases of less than the projected rate of inflation. Total capital spending across all the various votes will shrink by 7 per cent to €5.2 billion. This compares with a capital spending estimate for 2003 of €7.2 billion made at Budget time in 2002.
The Departments which have suffered most include the Tánaiste's Department of Enterprise Trade and Employment, which has had its budget cut by 7 per cent to just over €1 billion.
The biggest cuts here have fallen on the grant budgets of the IDA, Enterprise Ireland and Shannon Development. The FAS training and integration supports budget has been cut almost by half.
In addition, there is no increases for the Competition Authority and only a 2 per cent increase in the Budget for the Director of Corporate Enforcement.
The Department of Agriculture's budget has been left effectively unchanged at €842 million, but this camouflages cuts in the budgets of An Bord Glas and An Bord Bia, as well as the farm-investment programme and commitments under the national development plan.
The budget for Communications, Marine and Natural Resources, is down 13 per cent to €297 million, while the other reorganised department, Transport, sees its budget shrink 3 per cent to €1.8 billion.