New government spending plans for next year will have to be largely funded by diverting money from existing lower-priority projects, Ministers have been warned.
A confidential memo was drawn up by Minister for Public Expenditure and Reform Paschal Donohoe for the Cabinet this week. It warns of pressure on the fiscal space for 2018 as a result of the Government having to pay for a new public service pay deal as well as the costs of the new housing and homeless initiative and of measures introduced in the Budget carrying over into next year.
The fiscal space is the amount of money available after existing commitments are taken into account.
In the memo Mr Donohoe says that Ministers should set out their highest priority policy proposals for the 2018 budget by March 16th. He said they should also consider “potential resourcing requirements and impacts” of these new policy proposals in their areas.
However the memo, which has been seen by The Irish Times, also says: "Given the limited availability of fiscal space, new proposals will be largely funded from re-prioritisation of existing resources away from lower priority, less efficient and less effective policy areas."
“These areas will be identified and options for Government generated through the spending review process”.
The memo says that a spending review, which was previously announced last October for this year, would “now be tailored to reflect the changed fiscal and economic context” since a similar exercise was last undertaken in 2014.
Mr Donohoe says that the Government had already set out its estimates for the scale of fiscal space available in 2019 and 2019.
“However the totality of this money is not necessarily available for spending on new policies as there are particular pre-announced commitments and revisions that will have to be accounted for from the fiscal space.”
“The carryover cost of the Budget 2017 measures into 2018 will have to be funded out of the net fiscal space if savings cannot be found to cover these costs. In addition, revisions to the medium -term growth forecasts and the costs of capital commitments such as the action plan for housing and homelessness will likely impact on the funds available for new policy measures.”
“Any costs arising from a pay agreement will also have to be met.”
Mr Donohoe says that while the context has shifted away from the need to cut overall public spending to prioritising between numerous demands, “this can only be supported by the spending review process”.
Under the Government’s revised public pay strategy it wants to negotiate with trade unions representing about 300,000 State employees in the early summer on a successor to the existing Lansdowne Road pay accord.
This process is likely to get underway when the current Public Service Pay Commission concludes it work after Easter.
