The Cabinet has agreed the Government's spending plans for 1999, with substantial increases agreed for the health services and for the funding of investment projects in areas such as roads. Education will also receive some additional funds, following difficult negotiations on its spending allocation for next year, with the departments of defence and the environment also achieving allocations well ahead of 1997.
The overall rise in Government day-to-day spending compared to this year has been kept within its stated target of 4 per cent and the Minister for Finance Mr McCreevy is understood to be pleased with the outcome of the negotiations. The Department of Finance will now prepare the details of spending plans to be published in the Book of Estimates and the Public Capital Programme on November 11th, ahead of the December 2nd Budget.
The Government can afford to sanction increases of well over 4 per cent in spending in priority areas such as health, while still keeping the overall rise in current spending below the 4 per cent ceiling. This is because the overall figures will benefit from falling unemployment and the declining cost of servicing the national debt. There will still be room in the Budget figures for substantial tax reductions - of up to £400 million or more - while targeting an overall surplus of Government revenue over spending.
Much of the additional Government spending will go towards reducing hospital waiting lists, while additional recruitment to the Defence Forces will push up the defence allocation. A sizeable increase in spending on infrastructure projects is also in the pipeline as capital spending in this area is not covered by the 4 per cent cap, which applies to day-to-day spending.
Additional spending by the Department of the Environment comes under the capital investment heading and is set to rise well ahead of previous years, mainly due to the impending loss of EU structural funds and to the Government's desire to attack the bottlenecks which could threaten economic growth in areas such as road congestion.
Government spending on social welfare will be announced on Budget day. With the sharp fall in the numbers out of work, it will have scope to direct more funds towards groups such as the elderly.
Discussions on the tax package to be announced in the Budget will begin shortly. The benefit of much of the new round of tax cuts will be directed towards the lower paid, Government sources have indicated.
The Minister has indicated he will be presenting a "realistic" Budget in December. Measures to reduce the tax burden on the low paid and to tackle poverty are still expected to form part of the package. The Government is committed to delivering a Budget that will not fuel inflationary pressures in the economy. This means the Budget tax package will be aimed at providing the greatest benefit to the lower paid, although all taxpayers will benefit. It must also honour commitments to fight poverty and tackle social exclusion.
In framing the Estimates, the Government had to factor in the increases in public sector pay and the fall off in unemployment and reductions in the national debt. Repayments are declining due to falling interest rates and the nominal reduction in the value of the national debt, with Exchequer finances currently running a surplus of about £1 billion.
