Éamon Ó Cuív Questions Government Spending Outlook Amid Ukraine Costs

Minister, there have been a lot of announcements about quite significant expenditure and I have to give you great credit for that because lots of things have happened that I suppose many of us would have liked to have happened in the past but what I'm wondering is because you know better than I do you can't keep writing the cheques forever in view of the war in the Ukraine what is the likely outturn in terms of expenditure at the end of the year because huge extra costs are being born and the economy I think we're told won't be as robust as we had hoped this year growth won't be as robust so you might give me an outline of you know at this stage of the year four months gone how we're how we're going ahead Thank you very much Deputy O'Qui for raising this question the draft stability program update 2022 published on the 13th of April outlines the latest fiscal and economic projections for 2022 the SPU that's disability program update outlines core expenditure for 2022 of 80.1 billion with non-core expenditure of 7.5 billion euro including in respect of covert funding and the Brexit adjustment reserve this gives an overall government expenditure ceiling of 87.6 billion euro this compares to overall gross voted expenditure of almost 87.5 billion euro in 2022 2021 inclusive of capital carry carried over while in year-on-year terms expenditure is broadly flat there is a significant reduction in covert expenditure that is offset by an increase in core expenditure as outlined in the SPU there is an increase of 2 billion euro in capital spending this year compared to last year the government expenditure ceiling set out in the SPU is in line with that set out in the revised estimates 2022 The overall gross expenditure amount in the REV was inclusive of an unallocated COVID-19 contingency reserve of 3.9 billion at this stage taking into account the increased supports introduced in response to the December wave of the virus and additional funding required for the one-off cost of living measures introduced in recent months about one and a half billion euro of this reserve is now committed in addition there will be additional covert related expenditure that will need to be met from this reserve later in the year in particular as we enter winter in the winter period and this reserve will be another in particular as we enter the winter period. This reserve funding will also need to be utilised for the provision of supports to refugees arriving from Ukraine. The costs in relation to refugees will continue to be assessed by my department, including in the context of the summer economic statement, to ascertain the extent to which these costs can be met within existing departmental and overall allocations, taking into account any emerging underspends. Thank you and the answer is very comprehensive. I think the last few years there have been an extraordinary response to Covid and basically because free money was available from Europe we were able to spend our way out of it something that was very positive and I have no difficulty with, but it did entail borrowing a large amount of money and that was fine when that money was coming virtually at zero cost. But we know that with high inflation that central banks worldwide and the European Central Bank are now talking about putting interest rates up, so it would appear that that particular period is coming to an end which means that we will all have to be a bit more careful about balancing the books. Minister, if I separate capital from current because as far as I am concerned capital is investment, current is expenditure as it is gone in the year that it happens. The part of the reason for good results and expenditure front in previous years was an underspend in the capital. I don't think we should rely on that. So my question to you is, if we look at the current spend, taking all of the contingencies that we now know about, which is Covid as you have outlined in detail, and the Ukrainian crisis, how near to projection will the current spend come in at the end of the year based on what we know at the moment? Minister. Thank you very much, Deputy. In the current year we did provide for a reserve of almost 4 billion euro, 1.5 billion euro of which has now been spent or accounted for. That 4 billion euro was essentially earmarked for Covid. It is anticipated that it will not all be needed for Covid. Some of it certainly will. And we have said that the cost of looking after the Ukrainian refugees who come here will be met from that reserve as well. So we have an overall government expenditure ceiling of 87.6 billion euro. And it is my expectation that expenditure in overall terms will be managed within that government expenditure ceiling, which is the ceiling that was agreed on Budget Day and brought forward in the revised estimates volume in December of last year. But you are correct to point to elevated debt levels. Our debt now stands at about 236 billion euro. We spent 30 billion euro on direct expenditure measures across 2020 and 2021 in relation to Covid and made an overall provision in the current year of about 7 billion euro. But we are seeing Covid spending fall. Core spending is increasing. We have a medium-term fiscal framework now, as you know, which anchors growth in core expenditure to the underlying trend growth rate in the economy. That is about 5 per cent. So that is built into our framework. Though of course there are always pressures, but I am determined to ensure that we manage our public expenditure in a sustainable and responsible way. And that involves being very careful with taxpayers' money. Obviously, Minister, I welcome that because I think sustainability, we talk about sustainability in so many fronts, but financial sustainability, and I think you have been doing an extraordinary job because, as I have said, you have been making money available, aside from Covid and the crisis issues, for other things that needed to be done in our economy, and particularly in terms of capital expenditure, because we have a massive deficit. I take it a big factor in budgeting for 2023 is going to be, you know, as Covid, please God, will become a less and less of a feature, will be replaced by the costs, full-year costs of the Ukrainian crisis, if the numbers continue to come in here. And I take it, Minister, you might outline, you said expenditure increase at 5 per cent. So that would include, of course, all the expenditure from the Ukrainian crisis. And I take it that that will be a big factor in budget for arithmetic coming into the autumn. So you might just briefly outline the effect that we should have on a full-year basis. Sure. Thanks very much, Deputy. And as you know, in the stability programme update, we have made provision of up to €3 billion as to the cost of looking after the refugees across a full year next year. Now, it is a high-level estimate. We simply don't know in truth what the real cost will be. So much depends on the number of people who come here, how many of them stay, to what extent they will join the labour force and work. So it is a high-level estimate, but we have made provision for it. And in relation to capital expenditure, you know, we have the largest budget ever now in the history of the state at €12 billion. But the challenge we face is, one, delivery, getting projects done, and two, ensuring that we achieve a value for money. And we are seeing, as you will be well aware, significant increases in construction inflation. And that is manifesting itself now in new tender prices that are coming in for projects. So there are significant challenges in that space. And we discussed it earlier on in the course of oral PQs about what might need to be done to address that. Because I need to make sure on the one hand, that signing up to public works contracts is a viable proposition for contractors. But on the other hand, I need to make sure that we get value for money for taxpayers as well. Thank you. Thank you. Thank you.