It is forecast that social security expenditure will increase somewhat, even though the pension reforms
that are now in place are beginning to retard the growth in pension expenditure, inflation adjustments to
pensions will be exceptionally small and unemployment will decline. However, population ageing and
the ensuing growth of pension and social care expenses means that there is growing pressure towards an
increased proportion of social security expenditure in the longer term as well. It should be noted that due
to the prefunding of pensions the future increase in pension contribution rate is less steep than the
increase in pension expenditure rate.
It is expected that health care expenditure will continue to rise somewhat with the launch of the national
health programme, and in the long term there will also be growing expenditure pressures in health care as
a result of population ageing. Sickness insurance compensation and the reimbursement of medical
expenses in particular, will continue to rise apace. The share of the education expenditure is estimated to
decrease slightly. The ongoing changes in the population structure will in the short term help to relieve
pressures on education expenditure. It is projected that expenditure in general public services will
decrease over the next few years among other things on account of the productivity action programme
and the drive to cut back on personnel in central government.
Figure 3 – General government taxes, expenditure and gross debt in ratio to GDP0204060801980 1985 1990 1995 2000 04* 06**ExpenditureTaxesDebt4. Assessment and conclusions
The experiences of the new spending limits procedures are good. Spending limits set for the whole
electoral period have enhanced the medium term aspects of the public finances and helped to curb public
expenditure during the budget negotiations. In May 2003, the Government set the spending limits for
2004 at 28,049 million euros, which was subsequently revised for technical reasons to 28,089 million
euros. The total sum of the 2004 budget and supplementary budgets was around 80 million euros below
the revised spending limits, so expenditure was well within the framework established. Spending is also
on track to remain within the 2005 framework: when the spending limits for the second supplementary
budget are taken into account, there still remains some 87 million euros of unallocated provision.
In its Budget Proposal for 2006 the Government submits that the expenditure included in the spending
limits remain 232 million euros below the limits set for 2006. The amount of this unallocated provision is
almost the same as the corresponding expenditure needs in the current year and in 2004. Decisions
already made are causing expenditure pressure for 2007 and beyond, and therefore the preparation of the
next spending limits for 2007-2011^2 is a challenging task. However the Government is committed to the
(^2) The central government spending limits will exceptionally be drawn up for a five-year period because the personnel
reduction targets included in the productivity action programme extend to 2011.