Spending increases by 6% but here’s the sting in the detail

FINANCE Minister Brian Cowen delivered a seemingly generous spending programme for 2005 yesterday - but it came with a nasty sting in the tail.

The Book of Estimates for 2005 shows Government spending will increase by €2.5 billion next year to €43.5bn, a rise of 6% on this year’s expected out-turn of €41bn.

As was widely flagged, the bulk of the extra funding will be channelled into health and education. Health spending will increase by €950 million, or 9%, to almost €11bn, with an equally significant rise in education, which sees its budget rise by €530m (8%) to €7.1bn.

But the Government’s carrot-and-stick approach to public spending was evident in the detailed breakdown of spending plans unveiled by Health Minister Tánaiste Mary Harney.

She announced a series of policy changes that coupled generous gestures with harsh measures, including a 25% increase in the charge for private beds in public hospitals. The VHI said the increased charges will be passed on to customers.

The Estimates also left the Government open to criticism that it is asking middle-class taxpayers to subsidise the extension of a new doctor-only medical card for 230,000 patients.

While an extra €70m has been allotted to A&E services, admission charges have been increased by €10 to €55. In addition, patients will now have to pay the first €85 for medicines each month, compared to €78 last year.

Social welfare increases are traditionally reserved for Budget Day and it is anticipated Mr Cowen will announce substantial rises and a possible reverse of some of last year’s Savage 16 cuts. Taoiseach Bertie Ahern has already described the December Budget as a “winners’ budget”.

Mr Cowen disclosed that €1bn of the €2.5bn rise would be absorbed by higher public sector pay, which accounts for 40% of Exchequer spending.

Mr Cowen pointed to a buoyant revenue position. The deficit for 2004 will be €700m, over €2bn lower than projected. But he warned: “An expenditure spree ... would simply overheat our economy, lead to inflationary pressures and excessive wage demands and cause serious damage to our international competitiveness.”

Fine Gael finance spokesman Richard Bruton criticised the Government for being “big on talk but low on delivery”.

“Those who hoped that the era of stealth taxes were over will be disappointed. By imposing a substantial real cut in local authority funding, we can again expect substantial increases in commercial rates and refuse charges,” he said.

Labour finance spokeswoman Joan Burton said the “abandonment of the commitment to the 0.7% target for overseas development aid was a “national disgrace”.

Sinn Féin finance spokesman Caoimhghín Ó Caoláin said the Estimates signalled an early start to Fianna Fáil’s election campaign. “Belatedly, they are addressing some unfulfilled promises,” he said.

Green Party spokesman Dan Boyle said the Estimates revealed “gaps between what this Government intends to do and their new caring image”.

MEDICAL CHARGES:

In 1998, the cost of attending A&E rose from £12 (approx €15) to £20 (approx €25). After yesterday’s Book of Estimates 2005, the charge will rise another €10 from €45 to €55.

The threshold for the Drug Payments Scheme (DPS) was also increased in yesterday’s Estimates by €7, from €78 to €85, after already going up by €8 in the Estimates last November.

This means that whereas this time last year, an individual or family without medical cards had to pay no more than €70 in any calendar month for prescription medicines, they will now have to pay €85.

When the DPS was introduced in 1998, the threshold equated to €53.

VHI:

In September 1997, VHI bills rose by 9%, followed by identical increases in 1998 and 1999.

The next price hikes came in 2001: 6.25% in February and a further 9% in September. In 2002, there was an 18% hike, followed by average policy increases of 8.4% last year. This September, a further 3.8% increase in VHI’s main premiums kicked in.

Yesterday’s Book of Estimates included a 25% increase in the charge for a private bed in a public hospital, resulting in the VHI confirming that this price rise will be passed on to the consumer.

Since 1997, the typical VHI bill has cumulatively increased by over 70%. Following yesterday’s announcement, the bill will rise even higher next year.

VAT:

In Budget 2001, the Government reduced the standard rate of VAT from 21% to 20%, only to restore it to 21% again a year later.

In Budget 2003, the Government increased the lower rate from 12.5% to 13.5%, thus adding to the cost of many goods and services.

ELECTRICITY:

The Commission for Energy Regulation (CER) approved an 8.9% increase in domestic ESB bills in 2001, a 13.25% increase in 2002, and a 5% increase last year.

Last month, another increase kicked in. The average two-monthly bill is now €18 more than four years ago.

FINANCIAL TRANSACTIONS:

In Budget 2003, the stamp duty on cheques rose from 8c each to 15c.

Stamp duty on credit cards increased from €19 to €40. Stamp duty on ATM cards went from €6.25 to €10. Stamp duty of €10 was introduced on Laser cards.

RTÉ LICENCE FEE:

Was £70 (approx €89) when the Government came into power in 1997. Has since risen to €152, an increase of approximately 71%. In addition, the Government has approved a mechanism whereby the licence fee will increase in line with inflation.

COLLEGE REGISTRATION FEE:

Third-level fees were abolished in 1996. But the Government has been accused of seeking to reintroduce them by stealth via the once-off “registration” fee. This rose from €396 in 2001 to €670 in 2002 and increased again in 2003 to its present level of €750, an 89% increase in three years.

MOTOR TAX:

In December 2002, then Environment Minister Martin Cullen announced a 12% rise in motor tax. Last November, he announced a further 5% increase, meaning motor tax had risen by 17% in less than a year.

CIGARETTES AND ALCOHOL:

The cost of a packet of 20 cigarettes increased by approximately 95c between Budgets 1998 and 2002, and by a further 50c in Budget 2003.

Also in Budget 2003, there was an increase of 20c per standard spirit measure, and 35c per alcopop bottle. These hikes are on top of increases caused by inflation.

PUBLIC TRANSPORT:

Iarnród Éireann, Bus Éireann and Dublin Bus fares increased by an average 5% in January 2000. In November 2002, prices rose by a further 9% on average. The latest price increase, of roughly 3% on average, came last January.

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