Next government will face spending ‘time bombs’

The next government will immediately face a number of unforeseen spending pressures which will threaten the viability of election promises, according to officials and politicians.

Described by one senior Government source as “time bombs”, the spending pressures in several government departments will erode – or expend – the resources intended for fresh policy and spending commitments made during the election campaign, and likely to be included in any programme for government.

The Health Service Executive will soon face a bill of €250 million-€300 million following successful legal action by hospital consultants over its failure to pay salary increases due since 2009.

Two consultants won their case against the cuts at the Employment Appeals Tribunal (EAT), creating a precedent that the HSE believes means it will have to reimburse as many as 2,000 consultants.

The HSE has appealed the EAT decision to the High Court but, according to sources who have been briefed on the matter, senior officials entertain little hope of success.

It is understood the Attorney General has advised that the HSE settle the cases.

Budget overruns

The bill for the consultants’ legal action is likely to be dwarfed by continuing budget overruns in the health service.

Although the Department of Health was given a supplementary estimate of €600 million last year to cover the HSE’s overspending – a sum which it retained in its budget this year – several sources say the HSE will again need a bailout by the end of the year.

European budget rules prohibit this, but with the health service facing a cash crisis later in the year, political sources say that either discussions will have to be opened with the European Commission about bending the rules or a round of cutbacks will be necessary.

The HSE itself warned the Government as far back as December that it may face a shortfall of €300 million-€500 million if it seeks to deliver the services required of it.

Expected overspend

Combined with the expected overspend and the consultants’ bill, the health budget may be underprovisioned this year by as much as €1 billion.

The HSE overspent its budget by €32 million, or 3 per cent, in January, according to a Department of Health briefing note seen by The Irish Times.

Most of the extra money was spent in hospitals, where trolley numbers at times during the winter approached record levels.

There were also overruns in spending on the politically sensitive areas of homecare for older people and hi-tech drugs.

The next administration will also face severe spending pressures in the Department of Education due to pay demands by teachers.

Restoration of allowances across the public sector would cost €450 million a year, according to Government calculations.

There is also a widely acknowledged funding crisis at third level, and the new government will be presented with a report on new funding models for third level.

Funding pressures are also expected in the Department of Justice, with all parties pledging to hire more gardaí.

Figures produced at the time of the last budget estimated the next government would have a fiscal space – ie available resources for policy initiatives and spending pledges – of just €500 million in its first budget.

That position is due to be updated by the Spring Economic Statement this month.

However, sources say a caretaker government could not agree a position that would decide the budget size for its successor, and the Department of Finance may seek to delay the report to the commission.