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.

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