Large budget overspends in Department of Health cannot continue, Donohoe warns

Large budget overspends in the Department of Health cannot continue, Minister for Public Expenditure Paschal Donohoe has warned.

He said the department has needed supplementary funding “for every year I can remember” and “huge overspends in health expenditure have a very, very dramatic effect on our budget plans”.

He said such overspends affect funds available “not only in health but at times across the rest of government”.

Mr Donohoe was speaking upon the publication of the Government’s newly-published midyear expenditure report.

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It shows current expenditure by the Department of Health was €328 million more than what was expected in the first six months of 2023, largely due to higher-than-expected spending on the acute hospitals sector.

Its capital spending was €77 million less than expected.

The Health Service Executive (HSE) suggested in March that it could need more than €2 billion in additional funding above its official allocation for 2023.

The Business Post reported at the weekend that Mr Donohoe wrote to Minister for Health Stephen Donnelly expressing concern about the potential overrun, describing it as “an unprecedented level of financial risk”.

Mr Donohoe said on Wednesday that he was “working intensively” with Mr Donnelly on the overspend issue.

He said there were signs the overspend for the first half of the year would grow and he and Mr Donnelly were seeking to “get the balance right” between not changing the Government’s overall budget balance and at the same time “meeting health needs that we do know are there”.

Mr Donohoe added: “We are not in a position where we can continue to fund large overspends in the Department of Health and I’m working with Stephen in relation to that.”

He also said he was “not conceding the principle of there being a large supplementary [fund for health] even at this point”.

He said decisions on the health service were “always particularly challenging because it can have an effect on health services that our society needs”.

“But when you have a health budget now that stands at €24 billion there are decisions that can be made in relation to the management of that money that don’t have a negative effect on the availability of health services.”

Mr Donohoe said he was confident “we can make those decisions that will affect the scale of overspend that the HSE and Department of Health are currently indicating might happen”.

Current expenditure at the Department of Children and Integration is €458 million more than was expected in the first half of the year, which mostly reflects the cost of providing accommodation for Ukrainian refugees and people from other countries seeking international protection.

Mr Donohoe said the additional spend by the Department of Children would be covered by a noncore reserve fund the Government has put in place and it would be accounted for within the existing budget arithmetic.

The report said that in the first half of 2023 more than €1 billion had been spent providing supports for Ukrainian refugees across a range of government departments.

As of the end of June, State spending stood at €41.9 billion overall.

Current expenditure was €672 million – or 1.8 per cent – over profile but this was partially offset by the €571 million – or 15.4 per cent – underspend on capital projects.

An expenditure ceiling of €91.1 billion has been set for 2023.

Spending on capital projects in the first half of the year increased by €795 million – or 34 per cent – compared with 2022.

This was €571 million less than was expected as government departments continue to struggle to spend on building projects amid capacity constraints and other issues related to construction, however.

Capital spending by the Department of Housing was some €233 million behind profile “in part due to planning and construction delays” but it had spent €29 million more than in the same period last year due to a higher spend on local authority housing.

The Department of Transport spent €212 million less than expected on capital projects due to underspending on some public-transport infrastructure and work on national roads.

It spent €121 million more than the same period last year, however, mainly due to higher expenditure under the sustainable mobility programme and increased investment in public transport including heavy rail.

Mr Donohoe said he was confident money available through underspends could be used for different capital projects or that the under-profile government departments would catch up in the second half of the year. He said: "All the money that’s available within the Department of Housing for housing will stay there.”

Capital spending by the Department of Education, meanwhile, was €166 million more than expected, with the report saying this “reflects high construction inflation on projects delivering new schools/improvements, as well as additional school places for Ukrainian and other children in the international protection system”.