45126-Invest. Qual-No111

Investment in QualityThe Council’s recommendation that the increase in currentexpenditure should not exceed the growth of real GNP allowed forconsiderable flexibility for expenditure growth. It was a departurefrom earlier Strategy reports that had recommended very limitedgrowth of current expenditure. This recommendation would havebeen consistent with nominal growth of around 36 per cent incurrent expenditure between 1999 and 2002. In the event, theincrease in gross supply services expenditure between 1999 and2002 reached over 53 per cent in nominal terms. Supply servicesexpenditure as a percentage of GNP has increased by three percentagepoints since 1999 to over 29 per cent in 2002. Clearly, theincrease in expenditure over the last few years was significantlylarger than that recommended by the Council.In 1999 the Council recommended that the tax share of GNP shouldbe maintained close to its existing level. Since 1999, its share hasfallen by around three percentage points. This is a significant fall inthe course of three years and was not projected to occur in thebudgetary projections. While the reasons for the extent of thedecline are not fully understood, in part it reflects larger taxreductions than envisaged by the Council.From 1999 to 2001, the Exchequer pay and pensions bill increasedby 30 per cent and increased by a further 12.5 per cent in 2002. Theincrease in the pay bill reflects pay increases under Partnership2000 and the PPF as well as the effects of increases in public serviceemployment.Pay increases raise the cost of public services. However, publicservice pay increases are to be expected in a growing economy.What is important is that pay levels in the public service do notexceed those in the private sector or drive economy-wide paydevelopments—directly or through their implications for the taxburden—and that there is continuing adaptability and co-operationwith on-going change in delivering public services. The PublicService Benchmarking Body was established to oversee independentcomparisons between the public service and the private sectorpay levels. Combined with the linking of the final phase of the PPF200