Government has 'nothing to fear' over monthly troika reports on health spending

EU Commission internal report discloses concern over level of mortgage distress and high unemployment

Video: Harry McGee offers analysis

Minister for Health James Reilly: welcomed further oversight. Photographer: Dara Mac Dónaill/The Irish Times

Wed, Apr 3, 2013, 12:38

Minister for Health James Reilly has said his department has nothing to fear from possible monthly reporting to the troika.

Dr Reilly was speaking after an internal staff report prepared by the EU Commission revealed the EU-ECB-IMF troika has imposed a new requirement on the Government to report monthly on its efforts to rein in overspending in the health sector.

The confidential report also states that the sharp increase in the number of distressed mortgages is a source of persistent concern and expresses anxiety about the continuing high level of unemployment in Ireland.

Speaking in Dublin, Dr Reilly said there were "always difficulties with an finite budget and unlimited demand". However, he said he had been assured by incoming HSE head Tony O'Brien that spending was currently "well within perameters".

Dr Reilly said much work on timely reporting had already been done. "We used to have to wait until April of May of the year until we saw the way things were going," he said. "We have far greater controls than we had before".

He said he had always been in favour of "more transparancy and more accountability" and repeated that oversight was "all to the good".

The report, which will be discussed by parliamentary financial committees in the Oireachtas and in the German Bundestag in the coming weeks, will be published ahead of the next troika mission to Ireland later this month.

The overall assessment of the report is positive but it points to slippage and policy failures in some sectors.

The report, which runs to nearly 50 pages, contends that target savings in the health sector earmarked since 2012 have “failed to materialise” and that not all of the corrective measures, including reductions in staff costs and professional fees, the move to generic drugs, new prescription charges, and a reduction in the number of medical cards, have materialised.


Improved supervision


The report indicates that promised savings for 2013 cannot be achieved unless there is constant and improved supervision and monitoring of the Department of Health and the HSE “to track the controls and spending plans”. The subtext is that the overrun of €360 million in 2012 cannot be repeated.

It discloses “enhanced reporting requirements” not only to the Cabinet sub-committee on health, but also to the troika itself, which will get monthly briefings.

“This should allow early detection of any slippage and timely corrective action,” it states. “This is a first step in the right direction and should improve the chances of consolidation measures.”

The report also asserts that the very high level of unemployment needs to be “addressed forcefully” and suggests that reforms and engagement by the Department of Social Protection has not been extensive enough.

On the issue of distressed loans and crisis mortgages, the report states that progress in resolving non-performing loans has been slow. The “high level of loan defaults on banks’ balance sheet raises concerns about potential future losses. In particular, the high level of mortgages in default is a persistent source of concern.”

Contending that banks must be in a position to collect collateral on non-performing loans and mortgages, it also suggested that some indebted households were prioritising debt such as credit card debt ahead of mortgages.


‘Moral hazard’


“Specifically banks report that a significant number of consumers are prioritising unsecured debt over the repayment of their secured mortgage debt . . . It may also reflect the moral hazard generated by legal uncertainty about the banks’ ability to recover the collateral [following a 2011 High Court case that cast doubt over repossession orders issued after December 1st, 2009].

The report has also pointed to an ESRI analysis which showed that some measures in the 2013 budget were regressive, impacting more on the lowest-earning fifth of the population than the top-earning fifth.

While the overall assessment is positive, it does point to risks, including the continued uncertainty around the growth outlook and reform fatigue.

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