The annual Estimates provide the first half of the budgetary process. As such, final judgment must await Budget day itself, particularly this year when the Minister for Finance, Mr Cowen, has promised significant extra spending in the Budget on social welfare and capital projects.
From what we can judge, however, the new Minister appears to be taking a prudent approach. He has undertaken to adhere to the commitments in the Sustaining Progress national agreement, meaning the growth in current spending next year will be about the same as the growth in the economy. Yesterday's Estimates outlined a 6 per cent rise in spending on public services in 2005 and further increases on Budget day are likely to bring this figure to about 8 per cent.
The Minister has the benefit of buoyant Exchequer finances. This means that spending on services can generally increase ahead of inflation, State capital investment can remain at a high level and there will still be enough left on Budget day for the most generous tax package in some years. Yesterday's package aimed to address some key problem areas in health and education - many of which have been politically damaging to the Government. Unlike the "spend, spend, spend" approach before the last election - when huge increases in expenditure were not matched by commensurate improvements in services - the Coalition is now trying to deliver visible improvements. Only time will tell if it can succeed.
Few would quibble with many of the priorities identified in yesterday's Estimates. Medical card provision clearly needed to be widened, for example, and a mechanism has been developed to do this. Equally, the reversal of the cutbacks in rent supplements announced last year is welcome. However, the overall increase in spending in many areas is modest, particularly when it is taken into account that much of the rise will go on pay increases. The challenge for the responsible ministers will be to ensure a genuine improvement in services. If this is to be achieved, then reform is essential to ensure better value for money.
The Estimates leave Mr Cowen with considerable scope on Budget day. He will allocate extra capital spending to a range of areas, as well as introducing what should be a relatively generous social welfare package. There will also be room for some tax relief, with credits and tax bands both likely to increase ahead of inflation. It is particularly important that tax credits increase, as this is the measure which gives the greatest proportional benefit to lower-paid workers and would remove some from the tax net entirely.
The overall message from the Estimates is that the Government is trying to mix popularity with prudence. Its success in doing this will depend on whether the extra resources being made available can be translated into a genuine improvement in services in key areas such as health and education, and the timely delivery of key infrastructure projects.