The Minister for Finance and Public Expenditure & Reform, Paschal Donohoe T.D., has today (Thursday, 15 August 2019) published 18 papers as part of the Spending Review 2019. The Spending Review forms an integral part of the reformed Budget process, as it provides an opportunity to assess how spending is allocated.
The Government’s budgetary strategy is focused on ensuring that steady increases in public expenditure are affordable both today and into the future. As outlined in the Mid-Year Expenditure Report, this strategy requires that the effectiveness of existing expenditure is evaluated on a regular basis, alongside sustainable levels of expenditure growth.
The Spending Review is a key element of the budgetary framework that can assist in how Government spending is allocated and maintained. The Spending Review 2019 represents the third cycle in this series of rolling, selective reviews. It is expected that over €40 billion of Government spending will have been reviewed over the three years of the process. These reviews assist in shifting the emphasis away from the incremental increases in expenditure each year, by examining baseline Government expenditure as a whole.
A common theme in this year’s papers is the improvement in data availability to support analysis. This has largely been due to increased cooperation between Departments. Where gaps in data collection have been identified these have been called out in several papers for action. The value of the spending review process is to shine a light on areas where evidence gathering can be improved. Minister Donohoe also acknowledged both the improvements in data availability and the increase in the number of review papers being produced outside of his own Department, or collaboratively with officials from the Department of Public Expenditure and Reform.
Another key element of the Spending Review papers is to highlight the impact of demographic changes on areas of expenditure. This enables the government to target spending in areas where demographic changes will result in future pressures. Understanding how demographic changes will affect our economy over time allows the government to allocate resources in the upcoming Budget.
Adding to the Evidence Base
Much of the analysis published as part of the Spending Review 2019 builds on the work of previous years. Across a number of policy areas a more comprehensive picture is being built of what is working well and where improvements could be made. Speaking at the launch of the Spending Review 2019, Minister Donohoe highlighted that >‘the three year spending review process has been particularly successful in allowing for the development of in-depth analysis across a number of sectors particularly in housing, health, education, enterprise supports and agriculture.
This is the third and final year in the current round of Spending Reviews. Having published 50 papers over the last two years, 18 more papers covering a broad range of policy areas have been published today. Additional papers will also be published alongside the Budget in October.
As the current process is in the final year, Professor John O’ Hagan, Adjunct Professor of Economics at Trinity College Dublin, is undertaking an independent review of the process, which will also be published in October. It will assess if the Spending Review process has achieved its key objectives and, where appropriate, will provide recommendations and actions on how the process can be improved in future.
Notes for Editors:
What are the objectives of the Spending Review?
The Spending Review process is focused on five main objectives:
1. to create a larger stock of relevant analysis and evaluation across all Departments and Offices;
2. to underpin continued prudent allocations of expenditure with a focus on efficiency and effectiveness of spending;
3. to provide the evidence base for reform efforts across Departments and the wider public service;
4. to spotlight areas of innovation and good practice, both in programme design and delivery, that will be of wider interest and applicability; and
5. to ensure that this analysis is more firmly embedded within the budgetary process.
How does the Spending Review impact on the Budgetary process?
The Spending Review operates as a complementary process to the Budget. It is undertaken over the first half of each year in order to enable the output of the review in each area to feed into the consideration of expenditure proposals for the Budget.
How are Spending Review topics chosen?
In choosing topics to review, DPER and Departments consider programmes where efficiency and effectiveness could be improved, where issues of sustainability may be evident, and where there may be areas for potential reprioritisation.
What are the expected savings?
The aim of the Spending Review process is not to review or reduce expenditure ceilings, but to examine existing spending within those ceilings so as to identify less efficient areas. This systemic examination allows for the effectiveness of programmes to be assessed from the perspective of meeting policy objectives and identifying areas that may benefit from a re-allocation of funding. Ultimately, this should allow Government to tackle any concerns in the relevant areas, while potentially making some funding available for higher priority policies.
The current Spending Review process began in 2017 and ends in 2019. How does it differ from previous reviews?
The focus of this review process has shifted away from a need to reduce expenditure overall, to a need to prioritise competing demands. The aim of this process is not to reduce expenditure ceilings, but to create space within those ceilings to fund new, high-priority initiatives through systematic reviews of the existing cost base.
The design of the current process has been tailored to reflect the current fiscal and economic landscape, while reflecting the lessons learned from previous review rounds. The process itself begins earlier in the year than previous reviews would have and is operating as a separate but parallel process to the Budget. Also, instead of examining the entirety of the expenditure base in one year, it has been examined over a three year period.
The context in which this review is being carried out also differs significantly from previous review processes. The economy is growing and this has increased the State’s capacity to deliver enhanced public services. However, Ireland also operates within the EU fiscal rules. These rules place limits on expenditure growth and because of this there is a need to ensure that existing expenditure is both efficient and effective. The Spending Review is a key tool in this.