Finding Value-for-Money in Public Expenditure

The Department of Public Expenditure and Reform, having recently completed its 2017 Spending Review, has published a main report and a range of research documents. The principal document, Mid-Year Expenditure Report 2017, states that the emphasis is now on

“… ensuring the best use is made of all current resources – with a focus on value-for-money and policy effectiveness – within the moderate and sustainable increases in expenditure over the medium term”.^[i]

The eighteen research documents are mainly the work of the Irish Government Economic and Evaluation Service (IGEES). Two are overview documents, entitled The Central Votes: Spending Trends and Key Drivers and Tracking Trends in Public Spending. The other sixteen documents deal with specific areas of public expenditure; each analysing input and output trends and drivers of expenditure. All of these reports are available on the website of the Department of Public Expenditure and Reform, and make for interesting reading.^[ii]

 

A New Approach

The 2017 Spending Review does not cover all of public expenditure in Ireland. Rather, it is the first in a series of rolling, selective reviews, which will cover the totality of Government spending over a three-year period, up to 2019. Specifically, the principal document, Mid-Year Expenditure Report 2017, provides an overview of the rationale and methodology behind the Spending Review. As the Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, pointed out at the launch of the different reports:

“The Spending Review process allows for systematic examination of existing spending programmes to assess their effectiveness in meeting policy objectives and also to identify scope for re-allocating funding to meet expenditure priorities”.^[iii]

This is a new approach to reviewing expenditure, which has been tailored to reflect the current fiscal and economic landscape while also reflecting the lessons learned from previous rounds of expenditure reviews. The work was overseen by the Department of Public Expenditure and Reform, with other Departments and State bodies contributing to the development of the analytical base. Departments supplied detailed data and information in the development of the Review papers and also provided comments on papers.

 

Overall Spending Ceiling

The Mid-Year Expenditure Report has set out an indicative Government Expenditure Ceiling up to the year 2021. Table 1 shows the current and capital figures for 2021, taking 2015 as the base.

 

Table 1 : Government Expenditure, 2015 – 2021
	2015	2021	Change	Average
	€ billion	€ billion	€ billion	Annual %
Gross Voted Current Expenditure	50.9	59.0	8.1	2.5%
Gross Voted Capital Expenditure	3.7	7.8	4.1	13.2%
Total Gross Voted Expenditure	54.6	66.8	12.2	3.4%
Source: http://www.per.gov.ie/en/spending-review-2017/

 

In overall terms, the table shows that total gross voted expenditure is planned to grow by an annual average of over 3.4% over the six years, with day-to-day expenditure (gross voted current expenditure) growing by an annual average of 2.5% and capital by an average of 13.2%. The high-growth target being set for public capital investment expenditure is a response to the infrastructural deficit that occurred during the fiscal crisis. There is need for considerable public capital investment expenditure to ensure a strong infrastructure framework that will serve Ireland’s economic performance in the years ahead. More detail on capital expenditure is to be provided by Government in a new ten-year Capital Plan that is to be completed before the end of 2017.

 

The Research Documents

The eighteen research documents are comprised of sixteen ‘topic’ papers and two overview papers (the first that analyses input/output trends and the second that tracks the drivers of expenditure in key sectors). The topic documents were selected to reflect key strategic/priority areas of expenditure, both in terms of the quantum of expenditure and the significance of the emerging policy challenges, in the selected policy areas. The topics relate to the following areas; some areas have more than one topic document:

• Acute Hospital Expenditure
• Climate Change and Environment
• Courts Service
• Defence
• Education and Training
• Enterprise Ireland
• Housing Supports
• Pharmaceutical Expenditure
• Policing
• Public Transport
• Research, Development and Innovation Expenditure
• Social Protection Employment Supports

 

As the Mid-Year Expenditure Report points out,

“… Given the diversity of policy areas analysed in the Review, the papers differ reflecting the data available, the stock of relevant analysis already developed on the topic and the type of questions posed in the analysis”. ^[iv]

Accordingly, each topic document needs to be assessed on its own merits against the backdrop of the specific expenditure issues arising under each Department’s area of responsibilities. Nevertheless, a number of common themes did emerge from the range of topics covered by the Spending Review. These are summarised in Table 2.

 

Table 2: Themes emerging from the Topic Documents
Objectives/Rationale	Consideration of greater clarity of objectives and underpinning rationale for schemes and programmes
Data Gaps	Identification of data gaps leading to specific proposals for collection required for performance metrics/indicators going forward
Sustainability	Assessment of the sustainability of areas of expenditure going forward in particular by considering how the efficiency and effectiveness can be improved
Flexibility	Need to ensure policy is flexible to respond to changing economic and social context
Departmental Coordination	Need to ensure cross-cutting policies are effectively coordinated
Source: Mid-Year Expenditure Report 2017

 

Value of Spending Review

The Spending Review provides a valuable evidence-base to assist the Government in making decisions for public expenditure from the short-term to the long-term. It also provides the baseline for Departmental expenditure and the starting point for examination of budgetary priorities by the Oireachtas. Further, it provides a basis for encouraging a wider debate regarding how public money is allocated and the inherent trade-offs and choices that need to be addressed in the process. The real test will be seeing evidence that resource allocation decisions are influenced by the published research, and that these decisions are delivering the best value-for-money from the public purse to meet the needs of the public.

 

 

Notes

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^[i] Section 3.5, pg. 36. Available here.

^[ii] Full Report available here.

^[iii] Department of Public Expenditure and Reform press release, available here.

^[iv] Section 3.3, pg. 33. Available here.