State spending rises faster than planned

Government spending will increase this year at its fastest rate since 2001 and two percentage points faster than planned at Budget time, writes Marc Coleman, Economics Editor

The revised estimates for public services and public capital programme, published yesterday, put total gross voted spending for 2006 at a level of €50.6 billion - an increase of €5.7 billion on last year. Year-on-year, spending will increase by 13 per cent, according to the estimates. This is the fastest rate of increase since 2001 when spending rose by 16 per cent. Fine Gael yesterday condemned the estimates as evidence of a "boom and bust" approach to the nation's finances.

Finance Minister Brian Cowen attributed the increase over Budget targets to extra spending on second-level schools and dormant accounts. "The revised estimates volume provides for additional spending of €65 million funded from the dormant accounts fund. An additional allocation of €25 million has been made available for capital investment in second-level schools."

Spending is set to increase strongly across all headings. The vote groups of environment and transport will experience rises of 13 per cent, related largely to capital expenditure. Spending under the remit of the Departments of Social & Family Affairs and Health & Children are due to rise by 12 per cent and 11 per cent, respectively.

Fine Gael Deputy Leader and Finance spokesperson Richard Bruton TD said that Government plans would lead to a funding gap emerging in its future financial position. "The Government plans to increase taxation by just under 6 per cent. There is clearly a significant funding gap between the trends in spending and in taxation. The last time we saw this gap emerge was in 2001 and 2002 in the run-up to the last general election," Mr Bruton said.

He attributed the Government's spending plans to a breach in public sector recruitment targets "Despite the Government's commitment to reduce public service numbers by 5,000 in the 2002-2005 period, the Government has actually increased numbers by almost 22,000. A further increase in public service numbers of 8,800 is planned for 2006," he said.

Mr Cowen also addressed the controversy surrounding a €56.4 million carry-over of capital spending by the Health Services Executive earlier this year. In January it emerged that the HSE may have used money it underspent on its capital budget to fund overspending on day-to-day spending.

"The definitive positions in relation to capital spending in 2005 in the Health Services Executive (HSE) will not be known until end March when the appropriation accounts are finalised," Mr Cowen said yesterday. He added that legislation was still pending to give effect to reimbursement of charges for long-stay care in former health board funded institutions.

Total gross voted spending is a measures the bulk of Government expenditure under the direct control of the Dail.