Cowen: tax drop means no bailout for health
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Wednesday October 03 2007
Finance Minister Brian Cowen is adopting a tough stance on overspending in the health service as the slowdown in the property market has hit government revenues by up to €1.5bn.
Official sources made clear that Mr Cowen was insisting health spending came in on budget, despite the Health Service Executive (HSE) having overshot by €270m in the first nine months of the year.
A tough budget is also in prospect for next year, with a sharp curb on public spending growth and little scope for tax cuts. With most economists, including the ESRI, forecasting growth of around 3pc next year, the current official forecast for a 7pc rise in tax revenues next year may have to be cut.
Health service unions are threatening industrial action over the recruitment freezes and spending curbs already announced by the HSE.
Last night, health spending replaced the Taoiseach's personal finances as the top item on the political agenda. Labour leader Eamon Gilmore claimed the HSE was "clearly embarking" on a series of health cutbacks, with the backing of the Government.
In the Dáil, Taoiseach Bertie Ahern said the health budget had quadrupled to €15m and the HSE had to adhere as close as possible to the high allocation it gets.
Fine Gael health spokesman, James Reilly, TD said: "Once again, balancing the HSE books has taken priority over patient care."
Presenting Exchequer returns for the first nine months of the year, Department of Finance officials said talks were taking place on how to deal with the health service overspend. The talks are likely to be tough, with the department's own estimates showing that tax revenues for the year will be €1bn less than expected.
Senior official Philip Hamell said the Tanaiste "expects" health spending to come in on target.
"They get an allocation and they are expected to manage within it. They are given resources for a task and they are expected to manage within their resources," he said.
The figures show a €100m overshoot in the health budget. But this includes a saving of €170m on repayments due from nursing home charges which have not yet been claimed.
This money is ringfenced for the nursing home scheme and cannot be used on general spending on the health service.
Savings
Some outside economists think even the department's €1bn estimate for the tax shortfall this year may be too small. "We see tax receipts down about €1.5bn, offset by savings of €500m," said Pat McArdle, chief economist at Ulster Bank.
"The bottom line is that this will be the most difficult budget Brian Cowen has had to preside over," said Alan McQuaid in Bloxham Stockbrokers.
The problem is slumping revenues from the reduction in house building and stalled house sales.
Stamp duties brought in €400m less than expected and taxes on profits from property sales are more than €100m below estimates.
The rest of the economy is performing better than has been expected last December.
One exception is car sales, where there appears to have been no extra boost from SSIA money, leaving revenue from vehicle registration tax more than €200m below target.
