2002 Abridged Estimates & Summary Public Capital Programme
15 November, 2001
All figures are in euro
Good morning.
I will summarise the main areas that I intend to cover this morning. I will be referring to the economic context within which the 2002 Estimates have been framed. I will say a few words about the 2001 position and look briefly at trends since 1997. I will then deal with the 2002 allocations, current and capital.
Economic context
Today's publication of the 2002 Estimates is the first step towards the 2002 Budget on 5 December.
We are preparing for this Budget in the context of predictions for considerably weaker economic growth in 2001 and 2002 than anyone could have anticipated at this time last year. There is no doubt that the economic environment has changed sharply in recent months. Not so long ago many commentators were expressing concern about the Irish economy overheating. Things are very different now.
The pace of international economic activity has slowed markedly. There is widespread uncertainty about the timing and the pace of any pick-up globally, but especially in the US. Activity there should pick up next year. But it may not.
Our economy is in good shape, and should be well placed to benefit from international recovery. However, we must not plan on the basis of unreal expectations. Our main concern now must be to accommodate ourselves to the slowdown, so as to position Ireland to take full advantage of the recovery in global growth which will come.
We need to plan on the basis of much slower growth next year than we have had in recent times. At this juncture, budgetary policy calls for caution and prudence. This may seem unhelpful in terms of addressing immediate difficulties, or responding as fully as we would all wish to the many valid demands there are for further improvement in public services. But it is vital to ensuring that we can face the medium term with confidence in Ireland’s ability to return to the path of relatively rapid economic advance which has already brought so much benefit to all.
2001 Expenditure
I want to review briefly the outlook for spending this year.
The 2001 figures in the Abridged Estimates Volume being published this morning show the 2001 Estimates as published in the Revised Estimates Volume last March, as adjusted by Further Revised Estimates passed by the Dáil. The Estimates approved by the Dáil provided for total net voted expenditure of €25,004m in 2001.
The end-September Exchequer Returns indicated that net voted expenditure (current and capital) in the first nine months of the year was broadly on target, but that a shortfall on ESF receipts, of the order of €127m, could arise because of timing factors.
There are pressures arising for additional spending across a number of Votes which will have to be dealt with over the coming weeks.
Government’s Achievements since 1997
Before I unveil my plans for 2002, I want to take a moment or two to review this Government’s approach to public spending since it came into office in 1997.
In preparing my first Budget I judged that the Irish economy was sufficiently strong to allow for higher capital investment. In fact, net capital expenditure has increased by 150% between 1997 and 2001. The chart on the screen illustrates the trend in net voted capital spending.
Similarly, because our economy has been so successful since 1997, the Government has been able to provide substantial additional resources in current expenditure to deliver better public services. The chart on the screen illustrates the trend in net voted current spending.
An examination of the trend in gross total current and capital expenditure over the period 1997 to 2001 shows that:-
- gross Health spending has increased by over €3 billion, a cumulative increase of almost 90%;
- Education spending has increased by over €1.5 billion, a cumulative increase of almost 50%; and
- there have been very significant improvements in spending on Social Welfare schemes. Excluding the impact of live register changes, the underlying improvement is around €2.5 billion or 55%. There have also been substantial improvements in the rates of Child Benefit.
Approach to 2002 Estimates
I want to turn now to the 2002 Abridged Estimates and Summary Public Capital Programme.
This year I had to take account of the exceptional slowdown in economic activity abroad and at home. There is also greater uncertainty than normal about next year’s budgetary prospects. These factors require a prudent approach to planning public expenditure for 2002. I have decided, therefore, to concentrate the available resources in a number of key areas. This has, inevitably required a tighter approach in other areas.
As you will see shortly, the 2002 Estimates already provide significantly increased capital allocations for roads, public transport, water, housing, health and education. I intend to devote further additional resources to these key infrastructural priorities in my forthcoming Budget.
My capacity to provide additional resources for infrastructural investment will depend on what resources are required to meet key priorities in other areas. It is essential to achieve a responsible overall Budget outcome.
My main reason for adopting this approach relates to the current economic situation. However, I am also conscious that the traditional approach to expenditure and taxation involves Governments announcing their spending plans separately from, and in advance of, their revenue plans. It seems to me that, looking to the future, it would be worth exploring the concept of a unified tax and expenditure budget. That, however, is an issue for another day!
2002 Estimate Provisions
I should emphasise at this stage that the figures in the Estimates Volume being published today are all in euro. A number of the summary tables at the start of the Volume also have Irish Punt figures but you will have to get used to thinking in euro during this press conference!
Overall increase
Total net voted expenditure in 2002 is estimated at €27.052 billion, an increase of just over €2bn, or 8%, on the 2001 Estimate. The table on the screen summarises the position.
The main increases are:-
- €800m for the Department of Health and Children
- €540m for the Department of Education and Science
- €350m for the Department of Social Community and Family Affairs
- €230m for the Department of the Environment and Local Government;
and
- €130m for Overseas Development Aid.
The chart on the screen gives a breakdown of total net voted expenditure in 2002 between the main sectors, health, education, social welfare, etc.
Current expenditure
Net current voted expenditure in 2002 is estimated at €22.076 billion, an increase of €1.8 billion, or 9% over the 2001 Estimate. The table on the screen summarises the position .
In 2002, the Government has decided to allocate significant additional resources to a number of key policy areas. You can see that priority is being given to health, education, social welfare and overseas development aid. I would like to say a few words on each of these in turn.
Health:I want to concentrate on gross figures for the Health sector because I believe this gives a more accurate reflection of overall levels of activity. The gross Health and Children current allocation is increasing from €6.5 billion to €7.3 billion. This represents a year-on-year increase of €795m. (The net figure is increasing from €5.4 billion to €6.1 billion, an increase of €709m.)
The figures I quoted earlier confirm that we have already put significant additional financial and manpower resources into Health and we are providing a substantial further increase next year, bringing the cumulative increase between 1997 and 2002 to nearly €4billion, or 110%.
The figures show that this Government is willing to make the necessary resources available for the health services. The challenge for the health service now is to put the necessary organisational and management changes in place in order to demonstrate that the service being provided not only meets public expectations but also represents value for money to the taxpayer. I expect that the forthcoming Health Strategy will take these issues on board, and that one of its central themes will be to create a new focus on delivery, and not just increased resources as has hitherto been the case.
Education and Science: The net current Education and Science allocation is increasing from €4 billion in 2001 to €4.5 billion in 2002. This is a year-on-year increase of €515 million, or 13%. I regard Education as an investment in our future and that is why it is being given such a high priority.
Resources are being made available for the education requirements of children under 18 who have special needs arising from disability. There are also significant increases in the allocations for third-level access initiatives for the disadvantaged and for Adult Education and Youth initiatives. The cumulative increase in net current expenditure on education over the period 1997 to 2002 will now amount to €1.7bn, an increase of nearly 65%.
Social, Community and Family Affairs:The net increase in the Social, Community and Family Affairs Estimate is €353 million or 8%. When account is taken of expenditure under the Social Insurance Fund, the increase in gross Social Welfare spending in 2002 over the 2001 Estimate is estimated at €686m or 9%.
This provides for the full year costs of the improvements made by the Government in the 2001 Budget, as well as technical factors, such as demographic changes. As usual, the Social Community and Family Affairs Estimate does not include any provision for increases in Social Welfare payment rates next year. These will be announced in my Budget.
ODA:An additional €132m net is being provided for the Overseas Development Assistance Programme (ODA). The additional provision, together with resources provided through other Votes will bring Ireland's overall ODA contribution to €463m in 2002 which is equivalent to 0.45% of GNP and reflects Ireland's commitment to increase ODA towards the UN target of 0.7% of GNP by 2007.
The chart on the screen gives a breakdown of net voted current expenditure in 2002 between the main sectors.
2002 capital expenditure
The average annual increase in capital spending between 1997 and 2001 has been over 20%. While I would like to be able to maintain this trend, I have to take account of the changed times. The pre-Budget provision for net voted capital expenditure in 2002 is €4,976m, an increase of €242m on the 2001 Estimate.
The table on the screen summarises the position .
Consistent with the Government’s commitment to infrastructure provision, and notwithstanding the tight budgetary position currently prevailing, I have sought to target available resources on key priority areas such as roads, public transport, housing, water, health and education. I want to say a few words about each of these priority areas.
Roads and Public Transport:The Government has decided that Exchequer spending on Roads and Public Transport initiatives next year will amount to €1,268m. This figure represents an increase of 8% over the 2001 Estimate. The cumulative increase for roads and public transport over the period 1997 to 2002 will now amount to almost €1bn, an increase of some 330%.
Housing:Exchequer spending on Local Authority and Social Housing in 2002 will exceed €840m, an increase of 7% over the 2001 Estimate. This 7% increase is coming on top of a 74% increase in 2001. The cumulative increase for housing over the period 1997 to 2002 will now amount to over €700m, an increase of over 300%.
Water:€450m Exchequer funding is being provided for the Water and Sewerage Services Programme, an increase of 7% on the 2001 allocation. The cumulative increase for water and sewerage services over the period 1997 to 2002 will now amount to about €250m or over 120%.
Health:The allocation for Health capital spending next year is €443m, 29% up on the 2001 Estimate. The cumulative increase in health capital spending over the period 1997 to 2002 will now amount to over €276m or over 160%.
Education:Almost €540m is being provided for Education building and other capital spending, an increase of 6% overall. The cumulative increase in education capital spending over the period 1997 to 2002 will now amount to over €370m, or almost 230%.
The chart on the screen gives a breakdown of net voted capital expenditure in 2002 between the main sectors.
Conclusion
To summarise:-
- The 2002 Estimates are providing substantial additional resources for a number of key areas like health, education and infrastructure.
- This inevitably involves a tighter approach in other areas in order to achieve a responsible Budget outcome in the very different circumstances we are now facing.
- As I said earlier, I intend to provide more funding for infrastructural investment on Budget day but I also need to strike the right overall mix of policies on Budget day.
If you have any questions, my officials and I will be happy to take them now.
Other Ministers will be giving detailed briefing on their own areas.