Cabinet memo warns public sector pay deal has taken all extra funds for existing services

Cuts to existing services will have to be made by ministers if they want to pay for new spending plans next year, they have been warned, writes Daniel McConnell of the Irish Examiner.

A Cabinet memo drawn up by Minister for Public Expenditure and Reform Paschal Donohoe for ministers, seen by the Irish Examiner, confirms warnings from him that the pending public sector pay deal as well as matters already announced have hoovered up any available extra monies.

The memo said 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, will mean any additional measures will have to be met from existing resources.

In layman's terms, this means cuts to existing services.

In the Cabinet memo, which will be discussed by ministers on Tuesday, Mr Donohoe said "increasing and competing public service demands" would mean managing expenditure was likely to prove "challenging".

Mr Donohoe has said Ministers should set out their highest priority policy proposals for next year's budget by no later than March 16.

They should also consider “potential resourcing requirements and impacts” of any new proposal, he said.

“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,” the memo stated.

“These areas will be identified and options for Government generated through the spending review process,” it added.

The Government had already set out its estimates for the scale of fiscal space available in 2018 and 2019, Mr Donohoe has told his Cabinet colleagues.

“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 memo said.

“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,” it added.

“Any costs arising from a pay agreement will also have to be met.”

The Dublin Central TD said the money for the pay rises would be found through savings across all departments.

However, the minister admitted he did not currently have the funding to pay for the agreement reached with unions.

Mr Donohoe's warning comes weeks after he agreed to bring forward pay increases by several months, costing the taxpayer an additional €120m this year.

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