Analysis: Bending rules on spending likely for public service

The record of the last government may not have found favour with voters in the recent election, but its achievement in controlling public expenditure was a considerable one. It did so at a time of enormous pressure on public services and their budgets.

Not surprisingly, the new Department of Public Expenditure and Reform – which found itself saying no to spending requests a lot more than it said yes – found itself deeply unpopular throughout government for its parsimoniousness.

But even the hard chaws of “D-PER” (as it become known) relented occasionally. End-of-year supplementary estimates – votes by the Dáil to authorise extra spending – became an increasing feature of government life as it moved towards the end of its term.

Social welfare

Take the last budget. All last year, the coalition insisted it would stick to the spring economic statement target of a budget package of €1.5 billion in tax cuts and spending increases. And on budget day, Minister for Finance

Michael Noonan

and Minister for Public Expenditure

Brendan Howlin

kept their word. However, they also provided for supplementary estimates of another €1.6 billion – mostly in the departments of health and social welfare – which was added into the budgets for last year.

The neat trick with this was that because this new spending was put into last year’s budget, it automatically was also included in this year’s budget, increasing the base. However, Ministers repeatedly warned this wheeze could not be repeated. European rules meant supplementary estimates were over: departments could not overspend in the expectation they would be bailed out at year end.

Here’s what Howlin said last October: “There will not be scope for supplementary estimates next year . . . In many ways, the budgetary analysis will have to be robust to ensure everybody lives within their budgetary allocation for next year.”

He and other Ministers repeated the same thing on many occasions. However, thinking in official and political circles is changing. Several senior sources say the apparently iron rule of “no more supplementaries” will inevitably end up being bent.

"The rules are complex and somewhat ambiguous," says one highly placed source. He and other sources stress the political reality: a new government will be faced with urgent spending pressures, especially in the Department of Health, while a strongly growing economy produces extra tax revenues.

If strong growth continues, and taxes continue to outperform projections, it will be extremely difficult – and politically unwise – for a government to withhold it from public services where many proclaim an immediate need for further investment.

For instance in the health service – which insiders expect to burst its budgets by at least as much as last year’s €600 million – the government would have to introduce spending cuts in the second half of the year if it was going to force the HSE to stick to its funding allocation.

Union demands

That is to say nothing of housing, schools and public-sector pay, where vocal unions are already demanding more resources for their members.

Bending the rules will require the understanding and co-operation of the European Commission. Next week, government officials will send the stability programme update to Brussels. There might be a few others things on the agenda, too.