Government departments will face greater sanctions for breaching their spending allocations, Minister for Public Expenditure Jack Chambers has warned.
At the launch of the Government’s midyear spending review, Chambers said his department would “withdraw sanction for certain pay or non-pay elements if (spending) ill-discipline emerges within departments”.
He also warned that ministers seeking extra money in the upcoming budget would have to find it within their existing allocations.
“If departments want room for significant new measures, they will be the architects of their own fiscal space in 2027,” he said.
READ MORE
Chambers and Minister for Finance Simon Harris are trying to impose greater controls on department spending amid a near doubling of public expenditure since 2019.
His department’s spending review, which sets out the fiscal baseline for the upcoming budget, indicates that overall spending will be increased by €7 billion next year, comprising €5.9 billion in additional day-to-day spending and €1.1 billion in capital expenditure on infrastructure such as energy, water and transport.
This will bring total expenditure to €125 billion in 2027.
Overall, this represents a 5.9 per cent increase in spending in line with the Government’s Medium Term Expenditure Framework, published last year, which seeks to put a 6 per cent cap on annual spending increases out to 2030.
The budget will also contain a larger-than-expected €1.5 billion tax package, higher than the €1.3 billion allocated last year.
The rapid increase in spending has become a big flashpoint for the Coalition. Government is already forecasting overruns in departmental budgets of €700 million this year.
But the Fiscal Advisory Council says these could stretch to €850 million and beyond.
On the rise in spending since 2019, Chambers said there were certain areas such as education where there were frontline “staffing deficits”.
However, he conceded there were elements of the healthcare system that have not been efficient.
“We know the input costs and the level of expenditure has not been connected to the quantum level of outputs despite a growth (in spending) of €10 billion in the last number of years,” he said.
“Just endless recruitment everywhere doesn’t improve outcomes for citizens,” Chambers said, noting the upcoming budget would be about improving efficiencies.
While the Government is forecast to run a budgetary surplus of €9.2 billion this year, with bumper corporation tax revenues excluded, there will be an underlying deficit of €10.8 billion.
Following on from the Government’s recent Summer Economic Statement, the midyear expenditure review highlights spending trends and potential pressure points.
The latter include a new public sector pay deal, part of which will have to be paid for out of the €7 billion spending increase next year.
Chambers said negotiations had been delayed because unions were willing to ballot members and that he expected formal negotiations to start in September.
“Additional investment must be targeted at policies and programmes with higher marginal returns while managing capacity constraints,” Chambers said.
“We must strengthen governance and reform delivery processes to maximise the marginal gains from additional investment and to ensure that each additional euro invested generates beneficial outcomes for people, society and the economy.”
