Buried seven paragraphs into an answer to a routine parliamentary question came the first public indication of the real-world consequences of the Cabinet’s new strategy for tackling Government overspending.
Fine Gael Tipperary South TD Michael Murphy wanted to know the Coalition’s plans to reduce college fees, given the rising cost of living.
In a written answer last month, Minister for Further and Higher Education James Lawless said while options would be considered, the Cabinet’s recent decision to levy departments to cover expenditure pressures in other areas “may necessitate limitations on new measures in Budget 2027”.
The comment generated some concern on the Fine Gael backbenches. The party’s spokeswoman on higher education, Maeve O’Connell, expressed disappointment that Lawless was “not interested” in bringing forward proposals to reduce student fees.
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Lawless specifically suggested that resources for new measures could be curtailed by the Cabinet’s policy, agreed a few weeks earlier, that other departments would have to contribute €446 million next year towards meeting an overall €646 million overrun in the education budget.
However, just hours after O’Connell’s comments on student fees on Tuesday, the financial problem for the Government potentially escalated with budgetary issues emerging in the health service.
In a memo to her senior management team on Tuesday, HSE chief Anne O’Connor revealed that its financial position had “significantly worsened” in March – it had recorded a €250 million overrun for the first three months.
In early April, very shortly after taking up the role, O’Connor directed her managers to introduce “immediate corrective measures”, as after two months the budget had been exceeded by nearly €150 million.
However, on Tuesday, she said the measures taken so far had not delivered the improvements required. In fact, the figures suggested the rate of overspending had accelerated.
O’Connor directed that three HSE regions – Dublin and Southeast, Dublin and Midlands and the Southwest – be placed in what is technically known as tier three escalation, which involved the introduction of employment controls and more scrutiny over spending.
[ The Irish Times view on Government overspends: firm grip neededOpens in new window ]
Specifically, non-frontline and non-clinical recruitment in these areas was to be paused without top-level approval. This move will largely affect clerical and administrative staff, but there was a hint of more extensive measures to come if the financial situation did not improve.
“The purpose [of the measures being introduced now] is to ensure that as the year progresses, we can avoid taking decisions which would affect the services we provide”, O’Connor said.
In the world of health budgeting, it is generally overly simplistic to multiply a first-quarter deficit by four to get a projection for the full year, as there can be seasonal issues that impact, for example, the number of patients attending hospitals. However, within the health service, some believed that without corrective measures, spending could run up to €700 million – €800 million over budget.
A key question among those in Government in recent days has been whether the potential HSE overrun increased the amount other departments could be asked to pay to balance the books.
No, according to some senior figures in Government. Or at least “not yet anyway”.
Government figures are drawing distinctions between the situation in education, where there appeared to be no chance of bringing down spending given the rise in demand, for example, for additional special needs classes and schools, and in health, where efforts are being made.
“It is only quarter one. Can she [O’Connor] bring the overrun back by the end of the year?” said one highly placed figure in Government.
Among some senior figures in the health service, there is a view that it would be very difficult to wind the spending overrun back to zero, and there will likely be some deficit by year’s end.
Meanwhile, public service trade unions will likely oppose vigorously any scaling back on recruitment, let alone the imposition of any overall embargo.
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While it will probably be several months before the full picture in health begins to crystallise, the option of seeking greater contributions from other departments to meet the cost remains on the table.
It is understood that in his April memo to Cabinet on the introduction of the levy on other departments to pay for €446 million in overspending in education, Minister for Public Expenditure Jack Chambers said other such measures could be considered necessary.
The levy was mooted initially in a letter from Chambers to Minister for Education Hildegarde Naughton on February 15th where he stressed the need “to ensure that policies under your department’s remit are delivered in line with the budget set for your department ... If necessary, overspending by any department may result in the need to levy all other Government departments in order to remain within the 2026 expenditure ceilings.”
In the letter, he maintained that recent years had seen “a significant increase” in the number and scale of what are known as supplementary estimates, under which the Government, towards the end of the year, authorised additional money to departments that had overshot their initial budgets.
Last November, it emerged that government departments needed more than €2 billion in additional funding, with the Department of Education requiring nearly €570 million and the Department of Health €302 million.
Chambers, in his letter to Naughton, said such a trend “undermines the integrity of the budget process and erodes the impact of subsequent budget packages”.
However, the question remains as to the political implications arising from curtailing the spending plans of Ministers to offset budgetary problems being experienced by their colleagues.
Dublin City University professor of politics Gary Murphy said he could not imagine in a Coalition government that had already lost a Minister of State and where there were some difficulties between the Fianna Fáil and Fine Gael side, in which “any self-respecting Minister or secretary general would say they would happily underspend by a billion so those spendthrifts in education or health can get a million more”.
He added: “So by putting up this idea that one government department will almost have to be a bulwark against another department is just a recipe for political and administrative disaster.”
