Cantillon: Shadow of overruns looms over budget

Budget haggling in the Coalition is into the final straight. As election talk intensifies, a parallel negotiation is under way on supplementary estimates to fill €1 billion in funding gaps this year in Health and other departments.

This is critical. Supplementary estimates this year will be rolled over into the 2016 base before any additional allocations in the budget next Tuesday. This is a rather convenient way of increasing the overall spend without breaking the letter of the political pledge not to go beyond the €1.5 billion limit on the expansionary fiscal package.

But for as long as the budget deficit was above 3 per cent of GDP the applicable fiscal rules allowed the Government to provide supplementary estimates once certain conditions were met.

With the deficit on course to come in well below 3 per cent this year, a different set of rules will apply in 2016.

Once the year begins, such rules forbid the allocation of fresh money into departments by expanding the national budget. Supplementary estimates are permitted towards the end of the year, but only if an equivalent amount of expenditure is cut elsewhere.

Given the frequency of health overruns, this will increase pressure in 2016 to adhere to the original budget. The only way to confront any overrun would be to curtail health services or curtail services in other departments to divert money into health.

That presents copious scope for political strife, for health overruns are never small. Health supplementaries this year are set to reach some €742 million, on top of €680 million in 2014 . That’s a grand total of €1.42 billion over budget in two years, a huge sum which makes the original allocations seem fanciful.

Then there is timing. Amid election speculation, haste to settle now points to urgency to clear the decks.