Analysis: Where will extra €1.1bn for departments come from ?

Government borrowing for this year will rise a bit because of the extra spending from a number of Government departments, notably health. In total a number of departments are looking for over €1.1 billion of additional funding.

The extra money needed will come from savings in other departments and from higher tax revenues, which are running more than €1.1 billion above target. However not all the extra spending flagged in the latest news was allowed for when the budget was announced last month.

There is always a lot of moving parts in measuring the budget deficit as a percentage of GDP, which is the basis on which borrowing forecasts are set. However it is possible now that the final outturn will be around the 3.7 per cent of GDP forecast in October’s budget, or a bit higher.After this week’s November tax returns an undershoot of the October prediction had seemed on the cards, but this likelihood was reduced by the need to spend more than budgeted.

Some of the extra spending had been allowed for in forecasts made on budget day, but not all. The figures will also be affected by updated GDP estimates to be published by the CSO next week and the final figures for tax and national debt payments.

With borrowing running way below the level we are committed to meet under EU rules ( remember the original borrowing target for this year was 4.7 per cent of GDP) , the extra spending will not cause any problem. In fact, because higher tax returns have given some leeway, part of the manoeuvre undertaken this week has been to bring forward some spending plans due for 2015 into this year. In turn, this reduces pressures a bit next year. There are also some once off factors in the figures which should not recur next year.

The need to put in extra funds highlights the continuing difficulty in health sticking to its budget, which can only be funded because other departments are running below budget and tax revenues are stronger than expected.

Over-runs in health have become an annual event and the €680 million this year is the largest to date. Minister Leo Varadkar is correct that this will not affect the allocation for 2015, made on Budget day. However it does affect the level of funding when you compare one year with the next and shows that pressure will remain to operate more efficiently.

Departments are now obliged each year to stick within spending ceilings -- and keeping the total below a certain level is part of the meeting EU budget rules to which we have signed up.

While the money is affordable, given the exchequer arithmetic, it does highlight the emergence of some pressure on spending as the economy improves.

And the sums involved are significant when you consider that the total is greater than raised via the combined total of property tax and water charge revenue, forecast to be just over €700 million next year.