Monday 19 August 2019

Health spending will stay on track - pledge by Minister for Finance Paschal Donohoe to Irish Fiscal Advisory Council

Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Seamus Coffey, head of Fiscal Advisory Council

David Chance

The Government has put in place measures to prevent another overrun in health spending, Minister for Finance Paschal Donohoe said in response to an Irish Fiscal Advisory Council report that criticised budgetary controls.

The June report lambasted the Government for using bumper corporation tax receipts to fund spending overruns, which it said had averaged €500m a year since 2013. The report was scathing about budget planning for the future, saying forecasts for State finances were "not credible" after years of overspending.

In a letter issued by the Minister yesterday, 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 the level forecast by the Department of Finance, although it was 8pc ahead of the same period in 2018.

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Seamus Coffey, head of Fiscal Advisory Council

The Irish Fiscal Advisory Council (IFAC) report also expressed concern over government reliance on company 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.

In his letter, Mr Donohoe said he was aware of the risks and this year’s budget forecasts were based on a lower number than 2018 and that his department was evaluating international tax changes that will reduce Ireland’s attractiveness for multinationals by clamping down on tax transfers.

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

The Minister defended the budget setting process, saying it was informed by experiences leading up to the crisis, when “large and ultimately unsustainable increases in expenditure were implemented”.

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