ANALYSIS:THE GOVERNMENT has responded to the steep deterioration in the public finances by introducing a package of spending cutbacks designed to save €440 million this year and €1 billion in 2009, writes PAUL TANSEYEconomics Editor.
Four specific areas have been earmarked to deliver this year's €440 million in expected savings.
First, savings of some €360 million on the spending plans of individual Government departments are expected to be announced in the Dáil before it rises for the summer tomorrow.
It is understood that these will include savings of €75 million engineered by the Office of Public Works in the remainder of this year. This will include €25 million as a result of the Government's decision yesterday to stall for the present any further spending on the acquisition of accommodation for its decentralisation drive.
The Gateways Innovation Fund, part of the spatial strategy, has been pencilled in to generate €40 million in expenditure savings by the year-end.
The reduction in gross national product (GNP) this year as a result of the economic downturn will cut €45 million from the original budget for overseas development assistance, even though ODA's share of GNP is estimated to rise from 0.54 per cent in 2007 to 0.56 per cent in 2008.
Estimated savings of €135 million are expected to be delivered by the Department of Health and Children during the remainder of 2008, principally because a major nursing home initiative, originally planned for 2008, is now unlikely to get off the ground this year.
The remaining €65 million in expected savings are spread across an array of departments and State agencies. Fás, for example, is expected to come up with savings of some €10 million on its original budget for 2008. Thus, the clipping back of planned spending by Government departments is expected to deliver €360 million of the €440 million in expenditure savings which the Government is seeking to extract in the remainder of this year.
The second area expected to deliver savings before the year end is the Efficiency Review, set up in Budget 2008.
The implementation of the Efficiency Review's findings is projected to yield €50 million in administrative savings by year-end. In Budget 2008, the Efficiency Review was asked to target "possible inefficiencies due to the multiplicity of boards and agencies; the need for better sharing of certain services; efficiencies in management, travel and consumables in general".
Third, some €21 million in savings are to be extracted from Government spending on external consultancy, advertising and public relations services in the rest of 2008. The Government had budgeted to spend €90 million on external consultants this year while a further €150 million had been been set aside for public relations and advertising. Now, this total of €240 million is to be trimmed by €21 million in the second half of the year. The Government budget for external consultancy, advertising and public relations is scheduled for a deep cut of 50 per cent between 2008 and 2009.
Fourth, all government departments, State agencies and local authorities - other than health and education - have been told to reduce their total pay bills by 3 per cent by the end of 2009. This curbing of pay for non-frontline staff is scheduled to deliver expenditure savings of €248 million by the end of 2009.
A small proportion of these savings - of the order of €10 million - are expected to crystallise in 2008. In all, these measures are expected to deliver €440 million in savings.
This target has not been selected arbitrarily. It is precisely the amount by which State spending on unemployment benefits is expected to overshoot initial projections due rises in the numbers out of work.