Speech at launch of Mid-Year Expenditure Report

13th July, 2016

Good afternoon everyone and thank you for coming.


In the Programme for a Partnership Government, this Government stated its ambition to ‘combine all our different talents to build a strong economy and to deliver a fair society.’


Sound public finances are one of the key foundations of achieving this ambition.


Following the difficult decisions taken by the previous Government, and the sacrifices of the Irish people, Ireland is now in a strong position, one that few would have imagined in 2011.


Our economy is growing strongly – which is very clear from yesterday’s CSO figures. The public finances are moving close to balance and our unemployment rate has moved below 8 per cent.


It is crucial that we continue to build on this strong foundation by striking the balance between budgetary and economic sustainability and continuing to provide our citizens with much-needed public services.


Prudent investment in physical and social capital will have a profound effect on our future economic growth and we must be mindful of this in planning public expenditure for the future.




Last month, the Minister for Finance and I published the Summer Economic Statement, or SES, setting out the Government’s medium term economic and fiscal plan.


The National Economic Dialogue that followed provided space for a frank and open discussion of budget priorities between the main stakeholders.


One of the key concerns raised at the Dialogue was the need for increased investment, particularly in the areas of housing and childcare. These concerns are shared by Government and I will return to them shortly.


Today’s publication of the Mid-Year Expenditure Report marks the next step in the reformed budget process, allowing for greater engagement by the Oireachtas in budget processes and deliberations.


The Report is intended to provide the starting point for examination of budget priorities for 2017 by the Oireachtas. It will highlight issues for discussion that will provide the basis for properly informed and meaningful dialogue between Committees and Departments.


And it sets out a clear articulation of the level of resources available for 2017.



As part of budget reforms which have been implemented in the post crisis period, we now plan government spending on a multiannual basis, setting ceilings over a three year time frame.


This means that the ceilings take account of demographic trends, pension and pay requirements and other programme commitments.  This provides for greater certainty and better planning for public service delivery and avoids ad-hoc decision making.


There have been modest increases in spending since 2015 to meet extra demands for health services, childcare and education, extra pension recipients and to honour the Lansdowne Road Pay Agreement.


Based on Budget 2016 measures, and in line with the multi-annual framework, some €870 million has already been committed for extra spending in these areas in 2017:


  • €300 million for the Lansdowne Road Agreement
  • €300 million for Demographic costs in Education, Social Welfare and Health
  • €100 million for other areas including Childcare, and
  • €160 million on capital expenditure.






As outlined in the SES, in addition to this, the Government has agreed that some €600 million will be available for new current spending in 2017 while some €250 million is being made available for investment in capital infrastructure.


These additional resources allow us to respond to some of the pressing priorities which have been identified by this Government –those of Health and Housing.


The Government agreed to provide an extra €500 million for health services as part of the 2016 Estimates process which was approved by the Dail last week and this will carry forward into 2017.


To meet the urgent need for extra housing, I have agreed to provide some €100 million of the additional €250m available for capital to the new Local Infrastructure Fund and to provide for the Development Levy Rebate.


Deciding how and where to spend money is a complex process, which must be carefully considered, particularly in the context of the challenges facing our economy.


Of course, the UK decision to leave the EU will create economic challenges for Ireland.


Closer to home, housing and healthcare remain key priorities.


To face these challenges and build a just society supported by a strong and resilient economy – both now and into the future – it is crucial that we invest in both our social and physical infrastructure in a targeted and sustainable way.




The strategy presented in the Summer Economic Statement provided for key commitments made in the Programme for a Partnership Government, increasing current expenditure on public services by €6.5 billion by 2021, relative to 2016.


It also went above and beyond the original commitment made on capital expenditure, allocating €5.1 billion over the 2017 allocation.


However, with much of the focus now on the fiscal space – the room for incremental change in the fiscal position – we cannot overlook the importance of considering the totality of spending in examining budget priorities.


In total, €55.8 billion has been made available to Departments in 2016. What is more, over the next three years, it is planned that a further €173 billion will be available.


This is a substantial amount. Indeed, funding for next year will be broadly in line with what was available to the State for day-to-day spending in 2008.


However, with the many competing priorities and demands for resources to consider, the need to continue to pursue efficiency and effectiveness in public spending is clear.


For example, much of the discussion on infrastructure in recent times has been around targeting a particular share or percentage of national income.


This is not without some merit and the plan set out in this Report would take investment to 3.8 per cent of national income by 2021.


But, what we must remember is that identifying and supporting the projects that represent the best possible value for the taxpayer, and which projects can contribute towards the development of a truly cohesive society, must be the real focus.




This Report sets out my Department’s approach to planning for public expenditure over the medium term.


It examines the key drivers of expenditure as well as other factors that will have to be considered in setting our expenditure priorities, such as the significant reforms to the process of managing and planning public expenditure.


Adherence to the fiscal rules, and the expenditure ceilings, will be crucial to the effective operation of our fiscal framework, and will secure the long-term sustainability of the public finances.


Over the last two years, we have seen a rise in Departmental spending of an average of 2½ per cent. Staff numbers in the Public Service have also risen by over 10,000 in that time so that front line services can meet the challenge of rising demand.


We need to ensure that these increases translate to improvements in the management and delivery of Public Services.


To do this, we will need to maintain our focus on Public Service Reform. In particular, the Lansdowne Road Agreement is of critical importance here in driving increased productivity across the Public Service, while at the same time setting out an agreed pathway for pay restoration to 2018 on an affordable and fiscally sustainable basis.




On my first day in this job, I said I would never forget that I am responsible for the public’s money. It is not my money or the Government’s money.


The reformed fiscal framework emphasises the importance of achieving maximum value for the taxpayer and maximum effectiveness of every euro that we spend.


We must ensure that we are spending our available resources on the right things and that there is no waste of these scarce resources.


One of the initiatives that helps to ensure that we are spending in the right areas is Performance Budgeting.


At its core, this initiative is concerned with ensuring that policy development and resource allocation decisions are properly informed.


It seeks to strengthen the focus on what is delivered with public funds, showing linkages between results and resources.


Social Impact Assessments of public expenditure policies also help us to examine whether we are targeting the right areas with public spending.


To this end, my Department has developed a special Social Impact Assessment Framework, to assess the impact of certain budgetary measures on household outcomes.




This Report should act not just as an outline of the latest public expenditure position and key areas of analysis, but also as a sign that the Government is committed to facilitating enhanced Oireachtas engagement with the budget process.


There were a number of Commitments made in the Programme for a Partnership Government which highlighted the need for a more participatory role for the Oireachtas in the budget cycle.


Last month’s publication of the Summer Economic Statement was the starting point of the reformed budget process.


The recent National Economic Dialogue expanded the conversation on where we should be focusing our attention and resources.


Today is the next step, as this Report will provide Members with the information they need to conduct appropriate, well-informed discussions with Government and to further form opinions on what our priorities should be for Budget 2017 and beyond.


It is important now that Oireachtas members now engage seriously and sensibly on the Budget and its implications for our economy and our society.


The Report represents the commitment that the Government has made to bring more openness and transparency to the budget process, in order to achieve the best possible outcomes for citizens.


It is my hope that its content will provide the basis for successful and fruitful discussions.


Thank you.