We need the full picture, not the partial one today's Estimates will provide. The Revenue Commissioners would expect nothing less from the public, writes Danny McCoy
The release today of the Government's Book of Expenditure Estimates for next year coincides with the final rush for accountants and the public to file their tax returns online for last year. Accountants working in industry have it particularly tough at present - trying to balance budgets when costs are rising and the market price for goods is falling.
Things work differently in the public sector with revenues usually rising because the taxpayer is a captive customer.
Given the position of the public sector as a monopoly supplier, the customer is conditioned to expect a higher price with a lower quantity of service. The accounting conventions used in the public finances do not help to alter this expectation - indeed, they can often disguise where the true cost emerges. The lack of consolidation of the Exchequer accounts with those of the local authorities is a major concern for the business community. Today's expenditure Estimates will award another hefty budget increase to Government departments and agencies. The budget next month will provide only a partial picture of how this is to be financed, with much of the cost being passed through to the local authorities, who in turn seek the funding from its main customer - the business ratepayer.
Total current and capital expenditure by central government and local authorities in Ireland will be about €60 billion in 2007. Expenditure announcements in December's budget will only account for about 3-4 per cent of this, while the main focus of today's Estimates will be on the rate of increase in public expenditure rather than the efficiency with which the existing spending pool is allocated.
Combined, the budget and the increase allocated in the Estimates, only account for less than 10 per cent of total public expenditure. The remaining 90 per cent largely lumbers from year-to-year safely under the radar of public scrutiny. This is why concerns remain about the value-for-money obtained from public expenditure in Ireland.
Government must do much more to improve the efficiency with which taxpayers' money is spent. Of course, some processes do exist, such as the activities of the Comptroller and Auditor General and the Expenditure Review Initiative, but further measures are required.
Urgent priorities include improved productivity and accountability by local authorities; controlling the public sector pay and pensions bill; proper economic analysis of capital investment projects; and a greater culture of evaluation and review in current expenditure programmes. All of these need better systems of accounting that mirror those in the private sector. Local authority expenditure is an area where limited assessment of value-for-money occurs. Increasingly, business is forced to pick up the tab for rising local authority staff costs in the form of spiralling rates and local charges. The traded sectors of the economy have sought to survive the price-cost squeeze of recent years by achieving greater productivity. Public authorities must now do the same.
Ibec, the employers' representative body, is calling on the Government to commit to a 12-month price freeze on all publicly administered services. This is particularly necessary because of the need to bring the inflation rate here into line with the EU average.
The local authorities feel squeezed as the Exchequer accounting mechanisms do not make explicit where the subvention of services are funded from. More explicit accounting of what the block grant from the Exchequer to local authorities covers would greatly focus attention on value for money. Hidden (though nonetheless real) costs do not make for efficient allocation of resources. For instance, why should Government departments not pay local authority rates as other businesses? It may ultimately come from the same pot but explicit costing should be the established principle.
Recent investment in expensive IT and automated systems must lead to a reduction in administrative staff in health and other parts of the public sector - allowing for greater staff numbers in frontline services. Most agree that we need more nurses, gardaí and teachers but these increases must go hand-in-hand with savings elsewhere in the system.
The Exchequer pay and pensions bill has exceeded €16 billion. Government must now ensure that public sector employee numbers are controlled, while Benchmarking II must address the generous pay and pensions currently enjoyed by those working for the State. Explicit accounting of the pension arrangements in the public sector must be transparent to provide a true benchmark with the private sector.
Prior assessment of capital investment projects is inadequate. Detailed cost benefit analyses must be an essential component of projects in the upcoming National Development Plan. While considerable infrastructure deficits remain, and greater capital investment is required, Government has an obligation to all taxpayers to ensure that the projects chosen provide the best possible return on investment.
The culture of programme evaluation remains weak. A higher proportion of current spending should be subject to evaluation and much greater emphasis should be placed on doing this in advance of the money being spent. Far too many of the reviews take place after the horse has bolted.
It is high time that the stewards of public sector expenditure in Ireland placed much greater focus on the efficiency with which taxpayers' money is spent. Proper accounting conventions that capture the whole of the public sector in a consolidated manner with explicit cost pricing are crucial first steps to make for better public administration.
We need to get the whole picture and not a partial one, as today's Estimates will provide. The Revenue Commissioners would expect nothing less from the public and their accountants. It is time it worked both ways.
Danny McCoy is director of policy at Ibec