Growth in Government spending next year is to be held at less than 4 per cent, figures to be published tomorrow will show. The spending estimates for 1998 will show an overall increase in day-to-day expenditure of between 3 and 3.5 per cent.
Extra spending on Budget day, mainly on social welfare increases, will add to the total to be announced in tomorrow's estimates and bring the expected increase in 1998 to around 4 per cent.
The Minister for Finance, Mr McCreevy, has secured Cabinet approval to restrain the growth in current spending to within the ceiling set in the Government programme.
This will ensure that he will be in an extremely strong financial position when he presents the 1998 Budget next month. He will be able to afford significant tax reductions, while still aiming for a surplus on the Exchequer finances next year. While growth in current spending will be kept at under 4 per cent, Mr McCreevy will have extra funds for priority areas in health and education. He is also set to announce a substantially more rapid increase in Exchequer capital spending. Assisted by EU funds, the Government will announce higher spending in areas such as roads and industrial grants.
Overall, the pre-Budget spending estimates are likely to allow for an annual increase of up to 3 or 3.5 per cent in current spending. However, there will be additional measures announced on Budget day, December 3rd. In tomorrow's package, education will receive a substantial increase, mostly due to the new higher education fund unveiled last week. This will require £100 million to be allowed for in next year's spending. A further £150 million will be allocated in 1998 and 1999.
About £40 million to pay for a Christmas bonus for social welfare recipients next year is also likely to be included in the estimates tomorrow.
There will be continued pressure from public sector pay. It is already clear that the 1998 figures will allow for £23 million for pensions to be brought into line with recent pay deals.
The way the Government has framed its spending targets means that increased PRSI receipts and a reduction in the cost of servicing the national debt will help Mr McCreevy to stay within the 4 per cent ceiling.
About £150 million for the An Post and Telecom Eireann pension funds and £100 million for the small savings reserve will be allowed for. However, the total amount to be provided under this heading will not be published until the end of the month.
