Business

Wednesday 21 August 2019

Health spending to face tougher scrutiny, says Donohoe

Paschal Donohoe has written to IFAC
Paschal Donohoe has written to IFAC

David Chance

Health spending overruns will not push the national finances off course this year, Minister for Finance Paschal Donohoe has said in response to a highly critical report from the Irish Fiscal Advisory Council in June.

Budget watchdog the IFAC's report lambasted the Government for using bumper corporation tax receipts to mask spending overruns, which it said had averaged €500m a year since 2013, and was scathing about budget planning for the future.

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In a letter from Minister Donohoe to the IFAC, he acknowledged the 2018 health spending overrun of €645m, but said a new health budget oversight group had been set up to ensure the Department of Health was kept on track. "The group is tasked with monitoring monthly expenditure against service line profiles, and to highlight deviations at an early stage and ensure remedial action is taken to ensure expenditure returns to profile," Mr Donohoe said.

By the middle of this year, health spending was 0.4pc below forecast, although it was 8pc ahead of the same period in 2018.

Some of the IFAC's most cutting criticism was on budget planning out to 2023, suggesting it was based on "an implausible slowdown in spending growth", which did not "reflect either likely future policies or the future cost of meeting existing commitments".

The minister said it was informed by experiences leading up to the crisis, when "large and ultimately unsustainable increases in expenditure were implemented".

The IFAC also raised concerns at an over-reliance on corporation taxes, which now account for 18.7pc of the tax take, the highest percentage in the European Union. It said "some €3bn to €6bn of annual receipts as of 2018" were in excess of the level that could be explained by the performance of the domestic economy.

Mr Donohoe said he was aware of the risks, and his department was evaluating international tax changes that will reduce Ireland's attractiveness for multinationals by clamping down on tax transfers.

Irish Independent

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