Economic and Budgetary Outlook
It is important to stress that the provisions I am announcing today build on the prudent economic management and significant investment by this Government over the last 9 years. Accordingly, I would like to present some key outcomes of the Government’s pursuit of sound and prudent fiscal policies over the past 9 years or so. The fact is that as a country, we have made remarkable economic and social progress. We have to consolidate this.
Ø Our public finances are extremely sound. We will comfortably achieve our Budget targets for 2005. Our debt/GDP ratio will be about 29 per cent at year end – compared with 65 per cent in 1997.
Ø Since 1997 we have achieved an average economic growth rate of 7 per cent – more than twice the EU average.
Ø We have radically reduced personal, business and capital tax rates encouraging enterprise and improving real take home pay.
Ø Unemployment has fallen dramatically and we are effectively a full employment economy at a time of strong population growth and net inward migration.
Ø Our policies promote enterprise. The total number employed now stands at record high of nearly 2 million. There are now around 500,000 more people at work compared to 1997. This is an increase of over a third and compares with employment growth of less than 9% (to end 2004) in the EU15.
I expect the economy to grow close to its potential rate of 4 ½ to 5 per cent over the medium term. While these rates of growth will be lower than in the previous decade they are very strong by international standards.
In framing the Estimates, the Government have continued its policy of prudent management of the economy. We have made choices with a view to striking an appropriate balance between promoting sustainable economic growth in the medium term and addressing priority social needs in the year ahead.
2005 Forecast Spending Outturn
Current expenditure
In the 2005 Revised Estimates Volume I provided for gross current spending of €39.6 billion. Current spending is on target thereby maintaining the disciplined record of this Government of not exceeding our expenditure targets.
Capital Spending
Capital spending now operates on a multi-annual basis incorporating provision for carryover from one year to the next of under spends not exceeding 10% of total voted capital. This new multi annual system facilitates better management of capital programmes and projects and ensures with the carryover that significant amounts of money are not lost to the capital budget.
In 2004 cash spent on investment was €5.2 billion. In 2005 in cash terms we will spend almost €6 billion (including carryover from 2004). This represents 15% more than in 2004. Departments will also carry forward another €285 million for spending in 2006.
2006 pre-Budget Estimates
Today’s allocations for expenditure on the public services in 2006 are the first stage in the 2006 Budget. There are additional needs to be met on Budget Day, but bearing in mind the scale of the funds I am allocating today additional spending in the Budget will be limited and will be focused on social welfare, childcare, care of the elderly and investment.
However, there are risks facing us going forward and we cannot afford to be complacent. These risks include: oil prices, interest rates, increased international competition for investment and in product markets.
Faced with these challenges we have to continue with the prudent fiscal policies which have played a major role in bringing about the economic and social success which we currently enjoy. If we don’t, we run the risk of undermining our increased prosperity and hinder our ability to achieve sustainable growth to generate the resources necessary to tackle poverty and social inequalities. These policies underpin competitiveness, support growth and help retain the flexibility required to deal with economic shocks. We also must ensure that wage increases are in line with productivity improvements if we are to prevent any further deterioration in our competitive position.
The overall impact will be an allocation of resources in 2006 which will sustain and fund improvements to our health, social welfare, education and other essential services and will maintain capital investment at a high level. Like last year’s Book of Estimates, these Estimates reflect our ability to spend money on the less well off, the marginalised, the sick, the young and the elderly.
In addition, the pursuit of value for money must remain and overarching priority for all spending agencies.
Turning now to the detail in the 2006 Abridged Estimates Volume (AEV), I am providing almost €3 billion of additional funding for public services, of which €2.7 billion is for current spending on day to day services. The additional provision will bring gross public expenditure to € 48.5 billion in 2006 on a pre-Budget basis. Of this some €42.2 billion is current and some 6.3 billion is capital. It represents a 6.6 per cent increase in expenditure.
The Government’s approach has been to target the additional resources of almost €3 billion to improve services especially to areas of most importance to people – our Health, Education and Welfare services.
In my forthcoming Budget I will make additional provision for social welfare improvements, capital investment, childcare and care of the elderly.
Capital spending
The 2006 Exchequer capital provisions published today reflect the figures set out in my last Budget. Total cash spend on investment on a pre-Budget basis will be almost €6.6 billion inclusive of the €285 million carryover from 2005. This is an increase of almost €600 million or 10% more than 2005.
In keeping with what has now become established practice, I will be announcing a new 5 year capital envelope on Budget Day. This will be consistent with the Government’s overall priority commitment to capital investment. It will also incorporate the increased investment on transport arising under the new 10 year envelope for transport I announced recently with my colleague the Minister for Transport.
Since 1997 the Government has:
- Expanded annual capital investment from €2 billion to almost €6.6 billion in 2006.
- Invested a total of €45 billion between 1997 and 2006.
- Increased the proportion of our nation’s resources dedicated to investment to 4.6% of GNP compared with 3.4% of GNP in 1997 and 2.5% of GDP in the EU15.
- An example of this increase is in the public transport area, there was no significant Exchequer funding for capital expenditure until 1997. It is now €435m.
There are many examples in concrete terms of what has been delivered
- Service enhancement has doubled capacity on the DART.
- A new Luas now carries an average of over 65,000 passengers a day.
- On the roads there are significant improvements for all to see such as the Swords to Dundalk motorway.
- Over 45,000 social housing units have been built between 1997 and 2005.
- Water, roads and environment services have been made it possible to build over 450,000 private houses in the same period.
- €8.5 billion will have been invested in our schools, hospitals and other facilities in the Health and Education areas between 1997 and 2006.
Value for Money
While we have seen significant improvements in public services as a result of this unprecedented level of public expenditure, I am absolutely determined that the principle that every euro of the taxpayers money must be well spent should apply. Poor management of public expenditure and wasteful expenditure are not acceptable to the Government. We owe it to the taxpayer to ensure that Government Departments and agencies constantly strive to achieve better value for money and cost effective delivery of projects.
Building on reforms such as the 5 year multi annual capital envelopes, revised capital appraisal guidelines and planned improvements in construction and construction related contracts, we recently announced two new initiatives to further improve the approach to securing value for money, an Initiative on Management of ICT Projects and Consultancies and additional measures on value for money which I announced on 20 October 2005.
Departments have been asked to give effect to the measures which can be implemented immediately and work is underway in relation to the updating the necessary guidelines and other necessary steps to implement all the measures in full. I am confident that these additional measures will result in a more accountable, transparent and effectively functioning public sector and better public services for the benefit of the taxpayer.
Current Spending
I will now turn to the main current spending allocations in the 2006 Estimates.
On a pre-Budget basis, I am announcing an overall increase of some €2.7 billion on day to day public services bringing the total gross provision to €42.2 billion for the year.
The Government is again giving priority to spending on health, education and social welfare. Nearly €1.9 billion or some 70 per cent of the additional €2.7 billion which I am providing for current spending on a pre-Budget basis is being allocated to these three priority areas.
Health and Children: The Health and Children allocation for current expenditure shown in the Estimates Volume is over €12 billion, an increase by €750 million or 7% on the forecast outturn. I would like to stress that the actual increase is about 9 per cent on an underlying basis when account is taken of a number of exceptional one-off expenses this year in respect of the establishment of the HSE.
In addition to this €750 million increase, I am providing separately a provisional allocation of €400 million in 2006 towards the cost of repaying charges for long-stay care in former health board funded institutions. When the necessary legislation is passed, the Dáil will be asked to approve an appropriate allocation of funding for this purpose to the HSE Vote.
The allocation which I am providing for today will allow for some €250 million in service improvements in Health the details of which will be outlined by my colleague the Tánaiste and Minister for Health later this afternoon. These relate to:
Ø Disability services
Ø Commissioning of new units
Ø Primary care
Ø The National Treatment Purchase Fund
Ø Emergency Planning, and
Ø Medical education and training
The details of these will be announced by my colleague the Tánaiste and Minister for Health later today.
Based on the 2006 allocation, Health expenditure will have increased by almost 250 per cent or about €8.6 billion since 1997. The increased spending has funded real improvements to frontline services.
Ø Expenditure on the General Medical Services scheme will be over €1.5 billion in 2006 from just over €360 million in 1997.
Ø Generally speaking, anyone waiting more than three months for a routine surgical procedure will now be facilitated by the National Treatment Purchase Fund. Up to the end of October 2005, over 36,300 patients have had treatment arranged for them by the Fund. The Fund has also made significant progress in reducing waiting times for patients. Data for the seven hospitals currently included on the new Patients Treatment Register showed that, on average, patients are waiting between 2 to 4 months for their operation for 17 out of the 20 most common surgical procedures. Total discharges (in-patient and day cases) for 2004 have increased by 36% since 1997.
Ø We have dramatically increased frontline staff in the Health Services – 2,000 additional Medical/Dental personnel have been appointed; almost 7,000 additional nurses; 620 additional consultant posts bringing the total to 1,947 and, nearly 7,000 other Health professionals such as Speech and Language therapists, Physiotherapists; Social Care and Social Workers; Psychologists and Environmental Health Officers have been appointed in the Health Services.
Education and Science: In 2006 the Education and Science allocation will increase by €530 million or about 8 per cent to € 7.2 billion.
Government current spending on education has increased by some € 4.2 billion 140 per cent since 1997. As the following indicates this money has been directed at improving services for our children and students.
Ø At primary level there will be 26,000 teaching posts next year, an increase of 5,000 over the 1997 provision. In other words nearly 1 teaching post in 5 did not exist in 1997. The pupil-teacher ratio at primary level has fallen from 22.3 to 1 in 1996/97 to 17 to 1 in 2003/04. Spending in the sector in 2006 represents an increase of over 170 per cent since 1997, or almost €1.7 billion. This is real progress by any measure.
Ø At post-primary level the Pupil-Teacher ratio has reduced from 16 to 1 in 1996/97 to 13.6 to 1 in 2003/04. Spending in the sector in 2006 represents an increase of almost 130 per cent since 1997, or over €1.5 billion.
Ø There are now more than 5,000 primary teachers – one-fifth of all primary teachers - working solely with children with special needs. In addition to this there are nearly 6,000 Special Needs Assistants providing individual support to children with special needs in schools, compared with fewer than 300 in 1997. The provision of this level of staffing will help ensure that children with special educational needs can fully meet their potential.
Ø Third Level participation rates have increased substantially in recent years, rising from 44 per cent in 1997 to 54 per cent in 2003. I am pleased to say that this increase has been largely driven by widening access to groups in society traditionally under represented at this level. Spending in the third level sector in 2006 represents a 100 per cent increase since 1997, or some €850 million.
Included in the allocation for 2006 is around €90 million to meet the cost of service improvements in a number of key areas, including:
Ø a one point reduction in the staffing schedule for primary schools with effect from September 2006, and a further one point reduction in 2007, creating about 200 additional posts in primary schools in both 2006 and 2007;
Ø the full year cost of some 590 additional resource teachers for pupils with special needs appointed in September 2005;
Ø the cost of some 270 new posts under the Delivering Equality of Opportunity Programme;
Ø the purchase of additional school buses and the hiring of additional minibuses, together with the retro-fitting of seatbelts to existing buses to ensure that the “three for two” arrangement on school buses is phased out by December 2006 and that all public and private sector buses are equipped with seat belts by September 2007;
Ø an increase of 10.8% in funding for capitation grants, for the maintenance and upkeep of our schools; this allow increased payments significantly above the rate of inflation for all primary and secondary schools; and
Ø increased funding of €10m for Research and Development activities at third level.
In future Budgets I will continue to give a high priority to spending on education. It directly influences the potential of the economy to grow and is hugely important to safeguarding our economic success. The quality of our labour force going forward will be critical to Ireland’s future.
The allocation for Social Welfare is €12.4 billion. This is a pre-Budget figure, so the increase of €230 million in today’s Estimates is only part of the story. I will be making separate provision for increases in social welfare payment rates on Budget Day.
The allocation for social welfare has more than doubled in the period since this Government took office from €5.7 billion in 1997 to €12.4 billion in 2006 on a pre-Budget basis.
This has allowed us to increase spending from 1997 on:
Ø pensioner incomes from €1.3 billion to almost €3 billion
Ø child benefit from €0.5 billion to almost €2 billion
Ø widows and lone parents from €1 billion to €2 billion
Ø illness disability and carers schemes from €0.8 billion to over €2.1 billion
Other Provisions
I am providing €1.3 billion for Enterprise, Trade and Employment and €1.28 billion for Agriculture and Food. This compares to expenditure of about €675 million and €815 million in 1997, an increase of €625 million or over 90 per cent and over €465 million or 57 per cent respectively.
In the productive sector, under the Enterprise, Trade and Employment Vote, total expenditure (both capital and current) on the Science and Technology Development Programme will be over €240 million – an increase of €24 million or 11% over 2005. I am also providing an additional €14 million in funding for research in the third level sector in education, bringing the total third level education allocation for Research and Development to €115 million. The combined allocation for Research and Development in these sectors in 2006 will be €358.6 million, an increase of 12 % on 2005. This is a critical area for the future development of our economy and it will continue to have a high priority in the years ahead.
Consumer issues
A sum of €3 million has been provided for the establishment of the National Consumer Agency who will raise awareness on key consumer issues and advocate on behalf of consumers.
I am also increasing the allocation for the Competition Authority by almost €750,000 to allow it to strengthen its Cartel Enforcement Division to enable it to substantially increase the number of investigations it can carry out into breaches of the Competition Act.
Justice
As regards security, I am increasing the provision for current spending on the Garda Vote by €105 million or 9 per cent to €1.2 billion. Included in this sum is €36 million for pay, training and related expenses for new recruits. .
At end 2005, the number of Gardaí employed will be 12, 250. The 2006 provision will allow for the employment of some 12,920 Gardaí in 2006, an increase of 2,000 on 1997 levels. The Government’s commitment to expand the Force by 2000 to a new complement of 14,000 will be achieved by early 2008.
Childcare
In 1997 expenditure on childcare was about €500 million and now it’s about €2.3 billion. The significant elements of the increase are: almost €1.5 billion on child benefit and the introduction in 2000 of the Equal Opportunities Childcare Programme. Over 26,000 thousand childcare places from a level of nil have already been created under this programme. In 2006 I am providing over €100m for this programme - €55 million in current spending and €47 million in capital spending. The capital allocation will bring the number of extra childcare places funded under the programme to approximately 30,000 at end-2006, while the non-capital allocation provides staffing grants to community childcare facilities and supports City and County Childcare Committees in their development activities. A lot has therefore been done already in the area of childcare but I will be addressing what more can be done in my Budget speech.
Provision for services for people with disabilities
In last year’s Budget, I announced a special disability multi-annual funding package of €900 million, €600 million in current spending and €300 million in capital for the years 2006-2009. This combined multi-annual capital and current expenditure package for disability represents a radical new approach to investment in public services for people with disabilities. It provides much greater transparency and assurance than has been available hitherto in relation to how spending in these particular services will progress over the medium term.
Expenditure on the provision of services for people with disability will be some €3 billion in 2005, almost €2.9 billion current and over €100 million capital. This represents an increase of over €400 million over 2004. The Estimates for 2006 provide for spending of almost €3.3 billion for disability specific services. This represents an increase of over €300 million or 10 per cent and includes €135 million under the special disability package announced in my last Budget. The bulk of this relates to the Health services and the Tánaiste will be announcing the details of this.
Overseas Development Aid
In September, the Government committed to reaching the target for Overseas Development Aid of 0.7% of GNP by 2012. This will be achieved on a phased basis with an interim target of 0.5% of GNP in 2007. As a first step in line with that commitment I am providing for a total commitment of €675 million or 0.47 per cent of GNP for ODA in 2006. This represents an increase of €129 million or 24 per cent on the 2005 allocation of €546 million.
2006 spending of €675 million compares with a mere €158 million in 1997 (0.27 per cent of GNP) – an increase of over 325 per cent. This demonstrates in a real way my commitment to seeing that Ireland makes a positive contribution to improving lives of those in poorer countries.
Ireland's contribution rate at 0.47 per cent compares with current indicative figures of 0.19 per cent in the US, 0.30 per cent in the OECD and 0.43 per cent average in the EU for 2006.
Conclusion
To summarise:
Ø This Government’s policies have transformed the Irish economy.
Ø We will continue these policies.
Ø Solid growth will enable additional resources to be applied to improve our public services in key areas that will both improve the capacity of our economy and further improving our social infrastructure look after the needs of our more vulnerable citizens.
Ø On Budget Day I will deal with the issues of social welfare, childcare, care of the elderly and investment.
Finally, I would also like to say that, as usual, other Ministers will be giving briefings on their own areas after this press briefing and will deal with any specific queries in relation to their Votes.
Enterprise, Trade and Employment
The Minister for Enterprise, Trade and Employment, Micheál Martin T.D. welcomed the allocation of additional funding for his Department in the 2006 Estimates published by the Minister for Finance.
The Department of Enterprise, Trade and Employment’s Estimate for 2006, totalling €1.726 billion (gross), including contributions from the National Training Fund, shows an increase of €76 million (4.6%) on the 2005 post-Budget allocation. This figure includes an increase of €55 million (4.2%) in Exchequer spending and an increase of €21 million (6.3%) in spending from the National Training Fund.
Commenting on the Estimates for his Department, the Minister said: “The overall increase in expenditure for my Department has been kept within the Government’s pre-Budget targets. However, I am very pleased that significant increases have been made for priority areas within my Department.”
