Watchdog highlights €302m health overspend

Watchdog highlights €302m health overspend
Finance Minister Paschal Donohoe

By Eamon Quinn

The fiscal watchdog has endorsed the Government’s new growth projections, but in a significant move a week before Finance Minister Paschal Donohoe releases his 2019 budget, has warned about a €302m overspend in health.

Seamus Coffey, chair of the Irish Fiscal Advisory Council, or IFAC, said that health was showing “a consistent pattern of overruns where plans are not being met”.

In recent years the increase in corporation tax receipts “had masked” additional health spending which raises concerns about fuelling “an already fast-growing economy”, he told the Irish Examiner.

Last year the Government was forced to pump an additional €195m into health than it had originally planned. 

But IFAC separately endorsed new economic growth forecasts on which Minister Donohoe will base his budget spending and tax plans.

In the new projections, the Department of Finance raised its GDP growth forecast for this year to 7.4%, up from around 5% growth in its previous forecast in April. 

In 2019, it sees GDP expanding by 4.2%. Last week, the Economic and Social Research Institute projected 2018 GDP would grow even faster, by 9%.

The latest exchequer figures showed revenues from corporation tax continued to run ahead of target last month; Vat receipts made up lost ground; and income tax met its target. 

Excise duties again underperformed, however.

But the spotlight fell on the overspend in health. At €41.6bn for the first nine months, overall gross voted current spending was running slightly above target. 

But health spending of €11.45bn was 2.7% or €302m above target at this stage. 

The Department of Finance said that recruitment and the delivery of services were driving the health spending overruns.

Conall Mac Coille, chief economist at Davy, said the September exchequer figures don’t “change the budget arithmetic very much”. 

“It’s a case of corporation [tax revenue] making up for small shortfalls elsewhere,” he said.

At €793m, corporation tax receipts for the month brought in almost 4% more than was anticipated, which means the Government over the full nine months collected almost €5.16bn from this single tax source, already 6.3% or €306m above its budget target.

For all of 2017, corporation tax brought in €8.2bn and last month’s strong performance suggests the bounty this year could exceed €8.7bn. 

The buoyant corporate receipts have depended on a handful of the largest multinationals based here and watchdogs have long warned the Government against basing any future overall spending plans on a potentially unreliable tax revenue source. 

At almost €2.19bn, Vat receipts were above target by €42m last month, a Vat-paying month, which left Vat revenues over the full nine months almost on target, at over €11.57bn.

Excise duties were again disrupted by the switch to plain packaging for tobacco products. 

At almost €3.88bn, excise duties have now brought in €339m less than was anticipated over the first nine months.

“The baseline scenario, as set out by my department, is for continued strong economic growth this year and next. But we cannot take this for granted, especially in such an uncertain global environment,” Minister Donohoe said.

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