Comprehensive review of expenditure

September will see the Government complete its multi-annual comprehensive review of expenditure and make decisions on its capital spending programme.

In its Programme for Government, published in March, the new Government committed to a comprehensive spending review, “to examine all areas of public spending, based on the Canadian model, and to develop multi-annual budget plans with a three-year time horizon.” The review is the first of its kind in Ireland. The Programme for Government stated the review would assess “effectiveness in achieving desired outcomes, and value for money,” by examining public bodies (including departments) significantly funded by the exchequer. In November last year the previous Government published a four-year plan, with current and capital spending targets for each department.

The spending review system in Canada, on which the Irish review is based, was introduced in 2007 and includes all government spending programmes being put through a rigorous evaluation process on a cyclical basis. Bodies are required to identify reallocation options totaling 5 per cent from their lowest-priority, lowest- performing programme spending. The results of the strategic review processes are announced in the federal Budget of the following year. In the UK, spending reviews fix three-year departmental spending limits.

In May there was an information briefing for government departments on the review, addressed by the Minister in charge of the review, Brendan Howlin.

In this edition, he commented that the expenditure review is about “looking for value for money, the way we spend money and stopping doing things we can’t afford anymore.”

Following his appointment as Secretary General of the new Department of Public Expenditure and Reform, Robert Watt wrote to the different departments elaborating on what was envisaged. In the first communiqué Watt referred to “the scaling back and elimination of programmes which are no longer affordable, or of lower priority.” Amongst the options it sought were proposals on:

• rationalising grant and subsidy schemes;

• streamlining of systems and policies for applying levies, charges and taxes;

• rationalising, merging or abolishing agencies; and

• suggestions on procurement policy, implementation of e-government and social housing supports.

It reiterated that the Minister believed public service managers should put forward “bold, creative, ambitious and even unpalatable savings and reform measures,” in its proposals. Three weeks later, Watt wrote to the heads of departments with several points of clarification. The letter stated that a fundamental review of department programmes was opportune, and that “clear specification of outputs and impacts of the key spending programmes will also feature in the performance-based budgeting approach,” which is to be implemented in other departments following its roll-out in the Departments of Finance and Agriculture this year. He asked departments to consider going beyond the indicative spending ceilings, and producing cross-cutting proposals that might have implications for other departments and reductions in staff numbers.

Part of the comprehensive review of expenditure will include a capital spending review. There has been speculation about certain decisions likely to emerge from this, including the capital spending of the Department of Transport. The capital spending review will steer the next National Development Plan 2012- 2018.

The last capital spending framework to be published was the previous government’s capital review programme, 2010-2016 and the Four Year Plan 2011-2014. The capital review programme prioritised a move away from road transport towards public transport, a significant increase in water services investment, a reduction in allocations to the housing programmes, and a doubling in share of total investment delivered through the enterprise development agencies. In its transport section there was a commitment to both the Metro North and the DART Underground project. The largest capital spending allocations in the 2011-2014 Four Year Plan were to the Departments of Transport, Environment and Education respectively.