Ciara Phelan: Tough budget negotiations could spell trouble for Stephen Donnelly

While insisting that relations with the health department are 'very professional', Public Expenditure Minister Michael McGrath says their budget discussions will be 'complex and challenging'

Public Expenditure Minister Michael McGrath, left,  played down reputed tensions between him and Health Minister Stephen Donnelly ahead of Budget 2023. Picture: Garrett White/Collins

Tough budget negotiations are expected to take place in the coming days but soundings suggest Health Minister Stephen Donnelly may suffer a spending blow.

Public Expenditure Minister Michael McGrath has admitted health spending generally is an issue, which his and Mr Donnelly’s officials are working through at the moment.

Although he moved to downplay reports that there is tension between both departments, he did not shy away from the idea that talks could turn sour.

Mr McGrath also said relations between officials are “workman-like” and “very professional” but added that budget discussions can be “complex and challenging”.

Mr McGrath was clear in his comments that there is little movement for spending within departments, given that the focus will be on putting money back in people’s pockets to help cope with inflation and “mammoth” energy bills.

He said: “The negotiations would be tough, because the scope for new measures is tight.

I recognise everyone has legitimate ambitions and I’ll be as flexible and as supportive as they possibly can be but there is a constraint and there has to be a constraint. 

However, Mr McGrath said health has “fallen short” in completing the level of recruitment that it received sanction for, despite being given the budget.

When asked by the Irish Examiner where his department stands with Mr Donnelly’s — given that officials have previously said very clearly there has been a credibility problem with spending figures — he said health spending “is always a hugely important area for Government to keep a close eye on”.

Mr McGrath said the HSE is dealing with legacy systems that are “frankly inadequate” and referred to the absence of an integrated financial management system. This “does make the reporting channels in terms of expenditure, not as robust as they should be, in the way that they come through,” he added.

He also revealed that he has had to “tease out” issues such as cash-based reporting on an accruals basis, which was an issue that “manifested last year in terms of the difference between the year-end position and what was reported”.

Covid spend

Mr McGrath said the Covid-19 provision will have to be added to due to the overspend when dealing with the Omicron wave earlier this year.

Some €800m was allocated to health at the beginning of the year and €200m in reserve with respect to Covid-19 but the department certainly went beyond that due to the responses required to the Omicron wave.

He added: “So in the coming weeks we’ll come to an overall view as to that balance between an overspend on Covid which is justified and fully understood as to the reasons for it, and where they are in relation to their core position.”

He said he expects to sit down with Mr Donnelly very shortly in relation to his spending power for next year.

Mr McGrath said other “colleagues will be disappointed” because the cost of standing still next year is a lot higher than it ever would have been, and the energy and the inflation situation has directly contributed to that.

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He added: “I think what we will look to do now is greater than what we might have been considering back in July for example.

“And it’s the combination of the permanent changes which you have to fund indefinitely and that is where you have to be really careful of using a projected surplus that is generated by corporate tax receipts that may ultimately prove unreliable, and we’ve received sufficient warnings of that.”