Thursday, January 5, 2012

Expenditure in the Exchequer Statements

We seem to spend an inordinate amount of time going through every possible representation of the tax revenue figures in the Exchequer Statements.  The latest post is a good example of this.   Why not devote even a fraction of this attention to the expenditure figures in the Exchequer Statements?

The answer of course is that the Exchequer Statements do not contain expenditure data that can be analysed in any meaningful fashion.  The appendix with the Analysis of Net Voted Expenditures shows that net voted expenditure was €45,711 million in 2011; in 2010 it was €721 million higher at €46,432 million.  What does this mean?

It is very hard to say.  Net voted expenditure is gross expenditure adjusted for departmental receipts (known as appropriations-in-aid).  If net expenditure changes it can be difficult to determine if this is as a result of expenditure changes or changes in departmental receipts.

This leads to statements like the following in the Information Note to this month’s Exchequer Statement:

The underspend on the Social Protection Vote was due to higher than expected PRSI receipts, which more than offset overspends on a number of schemes, including Jobseekers Allowance. 

Huh.  Spending is down because receipts are up.  Underspending and overspending in the same sentence.  All in all it is almost impossible to tell if spending is up or down.  There are changes and adjustments in the tax revenue figures but in general they are easier to track, and more information is presented, than those in the expenditure figures.

Note 4 in the Exchequer Statement indicates that expenditure in health has increased to €12,897 million from €11,578 million in 2010.  In the current era of austerity and expenditure cuts it seems unusual to suggest that expenditure in health increased by 11.4% in the last year.  Of course, this is nonsense but that is what the Exchequer Statement shows.

The reason for the change is the abolition of the Health Levy.  In 2010, the Health Levy was a departmental receipt for the Department of Health.  The receipts of €2,018 million were subtracted from gross expenditure to get the net expenditure figure for health reported in the Exchequer Statements.

Although net voted expenditure for health has risen we cannot use this to say that we are spending more money on health.  We don’t get monthly updates of actual (i.e. gross) expenditure in the Exchequer Statements but we can get the annual figures from the Databank provided by the Department of Public Expenditure and Reform. 

Gross expenditure in health fell from €15,169 million in 2010 to €14,316 million in 2011.  There was a 5.6% reduction in expenditure in health in 2011 but it is impossible to determine this from the monthly Exchequer Statements.  It would be extremely useful if the gross expenditure figures were also provided in the monthly Exchequer Returns. 

As it is the best we can do are annual tables like the following for the Health Group.

Gross Expenditure Health Group

Reporting net expenditure figures as is done in the Exchequer Statement has no impact on the reported Exchequer balance but we do not see how the figure is reached.  Even if monthly gross expenditure figures were provided for every department there would still be difficulties due to the abolition and creation of some departments and changes in the functions and responsibilities of others.

Anyway, the conclusion is that expenditure in health fell in 2011, particularly non-pay expenditure of the HSE (-8.5%) and the Office of the Minister for Children (-45.3%) even if the Exchequer Statement is reporting an increase in “net” expenditure.  As a result of issues like this there is little value in spending much time exploring the expenditure figures in the Exchequer Statements.


  1. A Happy New Year to your Seamus!

    Thanks for the blogpost above, I didn't know the Databank was updated so quickly.

    Do you know where the monthly profile of 2012 Exchequer receipts and payments is held. DoF just produce the current and prior YTD which makes monthly analysis very difficult.

  2. Hi Jagdip,

    Many happy returns.

    The 2011 figures in the DoPE&R Databank are still provisional and not the final outturn. I'm not sure when the figures are updated with the actual outcomes. The 2011 figures are taken from the Revised Estimates of Public Expenditure that was published in July. While I would not expect significant deviation I should have made the point that these are not final figures in the original post.

    The annual profile of tax revenue and net expenditure is usually released with the January Exchequer Statement so we can expect the 2012 versions sometime in the first week of February.

  3. Hi Seamus Happy new year.
    Thanks for the clarification on the dept of health spending increase.

    Why was it standard practice measured as a receipt and subtracted from health spending. Surely it makes more sense for it to be measured as an income as it now is.
    So is the main part of the increase in tax receipts down to the health levy now being measured as part of USC?
    I remember Karl Whelan also complaining about this exchequer balance methodology before saying the numbers we send to Europe of taking in 50 and spending 70 are more accurate.
    One last question if I may.
    Are there any more bank recaps planned for this year or was last years 7 billion hopefully the last?

  4. sorry left out some words in one sentance.
    why was it standard practice that the health levy was measured.

  5. Seamus Just read your excellent but depressing post from yesterday. It answered my question re the increase in income tax. The increase in income tax of 2.5% was the main headline on the 6 one news last night. The fact its is almost entirely down to reclassification was not mention.

  6. @ Eamonn

    There's a bit more to go on the bank recaps I'm afraid. After the stalling of the sale of Irish Life, IL&P needs another €1.3 billion. We will still have the profitable Irish Life arm so this is not all bad but it does consume scarce cash resources.

    The credit union sector is in meltdown. €250 million was provided as a "loan" this year. If losses here are anything like the banking system up to four times this amount could be required. The credit union sector has lots of problems. One big one is the emigration of people who have taken out credit union loans. They don't know where they've gone!