## 1. Public Spending ## Source details **Canonical URL:** [1. Public Spending](https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025090.pdf) ## Other formats - [Markdown version](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025090.pdf.md) - [Structured JSON version](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025090.pdf.json) --- ### A. Introduction: objectives and context - Purpose: benchmark Ireland’s public spending efficiency in infrastructure, health, and education against peers using Data Envelopment Analysis (DEA). - Rationale: - Enhancing public spending efficiency can: enable same quality with less spending, achieve better outcomes with current spending, or a mix of both; and help improve fiscal buffers for shocks. - Ireland’s underlying fiscal position has been supported by a large increase in corporate income tax (CIT) revenues, which are “highly concentrated and vulnerable to external policy shifts as well as firm- or sector-specific shocks.” - With the economy operating at full capacity, improving public spending efficiency would help address infrastructure and housing needs while avoiding pro-cyclical fiscal policy. - Key baseline statistics and measurement notes: - Total public spending: 40 percent of GNI* in 2023. - Comparability note: Indicators for Ireland are measured as share of GNI*, compared to other EU countries where a share of GDP is employed. - Peer comparators used: Austria, Belgium, Denmark, Luxembourg, the Netherlands, and Sweden. - Analytical approach: - DEA constructs an “efficiency frontier” showing maximum possible output for a given input; provides relative distance from frontier (potential efficiency gains). - Inputs: various measures of public spending per capita. - For health and education, outcome indicators were used (rather than outputs) to better capture quality and effectiveness. ### B. Infrastructure: gaps, trends, and efficiency - IMF Tool for Investment and Efficiency (2021) and related findings: - Physical infrastructure gap relative to the frontier: 32 percent. - Quality gap relative to the frontier: 27 percent. - Global/regional comparisons: - Ireland’s physical gap: 32 percent (global average gap 38 percent, European Union 21 percent, peer comparators 25 percent). - Ireland’s quality gap: 27 percent (global average gap 22 percent, EU 15 percent, peer comparators 8 percent). - Supporting evidence and indicators: - IFAC (2024): infrastructure per capita ~25 percent below high-income European country average; capital stock to national income ~20 percent below average. - IMD World Competitiveness index 2024: Ireland overall rank 4th of 67, infrastructure rank 17th, basic infrastructure rank 38th. - National Competitiveness and Productivity Council (2024): deficits in housing, energy, water, and wastewater are key competitiveness challenges. - Recent spending trends and commitments: - General government gross fixed capital formation: about 4 percent of GNI* in 2023. - Government commitment: €165 billion in capital investment over 2021–2030 through the National Development Plan (plan is currently being updated). - Programme for Government priority sectors: housing, water, energy, and transport. - Investment efficiency and implementation challenges: - Mapping physical infrastructure and quality indicators against public capital stock shows Ireland below the investment efficiency frontier in both quantity and quality measures—suggesting potential efficiency gains. - An alternate measure (Global Infrastructure Quality Index, 2023) yielded similar results. - Progress since 2017 PIMA: alignment of investment and planning (National Development Plan and Investment Framework), National Investment Office, annual spending reviews, investment project tracker. - Remaining challenges: planning delays, low construction productivity (need to utilize modern methods of construction), and labor shortages in the construction sector. ### C. Health: outcomes, capacity constraints, inputs, and efficiency - Outcome indicators and trends: - Health-adjusted life expectancy (HALE) at birth: 70 years (up from 66.25 in 2001). - Prior to the pandemic, Ireland’s life expectancy increased by more than the EU average; during the pandemic its decline was comparatively smaller (OECD, 2023). - Age-adjusted mortality rates (overall and for preventable and treatable causes): consistently lower than the EU average. - Self-reported health status: highest in the EU; favorable versus other OECD countries, but with widening socio-economic disparities. - Self-reported health by income quintile (2022): 90 percent of adults in the highest income quintile reported being in good health; 66 percent in the lowest quintile. - In old age: lower prevalence of health-related activity limitations relative to the EU average; Irish men and women likely to lead longer and healthier lives. - Capacity constraints and system pressures: - Extensive waitlists at public hospitals; backlog from the pandemic. - Deficit in bed capacity likely a key reason for overcrowding in public hospitals. - Public hospital beds per capita: undercapacity in 2022, significantly lower than the EU average. - Acute care hospital bed occupancy: 90 percent, above the recommended threshold of 85 percent for maintaining an emergency buffer (OECD, 2023). - Hospitalization rates for avoidable diseases (e.g., COPD): relatively high, indicating underdeveloped primary care. - Workforce challenges: recruitment and retention difficulties for permanent staff; doctor shortages in certain specializations despite relatively high production of medical graduates per capita compared to the EU. - Note: data does not yet reflect recent increases in the number of acute beds by the government; further expansion is planned. - Health spending levels, drivers, and cost structure: - Health spending is elevated relative to comparators, OECD and EU peers. - Public sources account for two-thirds of total health spending in Ireland. - Share of government expenditure on health rose from 19.6 percent in 2019 to almost 23 percent in 2023. - Since 2020, an additional 1,218 in-patient acute beds have been added. - The Acute Inpatient Hospital Bed Expansion Plan (announced May 2024) aims to deliver 4,367 acute hospital in-patient beds by 2031. - Ireland’s age structure: share of population below age 20 is 26 percent; median age is 38.8; share of population aged 65 and above is 15 percent. - Health spending measures in the chapter do not adjust for population age structure. - Potential contributory cost factors: hospital-based system orientation; relatively out-of-date clinical infrastructure; reliance on more costly agency staff; high general wage levels in the health sector. - Between 2016 and 2022: - Inflation-adjusted rise in costs was 45 percent relative to a 3.8 percent increase in activity (IGEES, 2024). - Total nominal increase of expenditure was 68 percent in 2016–2022, with an average budget variance of 10.8 percent in the acute hospitals. - The wage bill accounted for two-thirds of the rise in total expenditure. - Staffing in acute services increased by 33 percent between 2016 to 2022. - Non-pay expenditure has also risen, particularly from increases in non-clinical expenditure that were out of line with general trends. - Efficiency analysis and estimated gains: - Using HALE as an output and current health expenditure per capita in PPP terms as an input, the efficiency frontier suggests room for substantial efficiency gains. - Results are consistent when using alternative measures (age-adjusted mortality rates), when comparing total and government current health spending per capita as inputs, and with countries having similar health systems. - OECD study (Sicari and Sutherland, 2023) estimates potential efficiency gains: - Up to 15 percent on the input dimension (saving up to 15 percent of current health expenditures while maintaining unchanged life expectancy). - 1 percent on the output dimension (increase life expectancy by around 1 percent while keeping level of spending constant, but adjusting composition to OECD best practice). - Future pressures and long-term projections: - European Commission projections for Ireland: - Baseline public expenditure health costs projected to grow by 1.5 percentage points of GDP between 2022 and 2070 (second largest increase at the EU level). - Under a risk scenario, projected rise is 2.5 percentage points of GDP. - Share of population aged 65 and older projected to almost double from 15 percent in 2022 to 29 percent in 2070. - Old-age dependency ratio projected to more than double to 56 percent in 2070 from 26 percent in 2022. - Fiscal and policy implications: - Persistent budget overruns and high levels of spending point to potential gains in spending efficiency. - Improvements in health spending efficiency will help ensure continued delivery of quality healthcare amid growing demands and contribute to fiscal buffers for shocks. - Specific issues for efficiency and control improvements: staffing recruitment and retention challenges; increased use of locum and agency staff and overtime despite workforce expansion; questions on control management and expenditure compliance in acute services; forecasts may not sufficiently account for costs of maintaining existing service levels. ### D. Methodological note on DEA usage and limitations - DEA characteristics relevant to interpretation: - Non-parametric; does not impose functional form between inputs and outputs. - Does not provide marginal change estimates; indicates relative “distance” to the frontier as potential efficiency gains. - Sensitive to sample selection; use of EU and OECD samples intended to improve comparability. - For health and education, outcomes were preferred over outputs to better capture quality and effectiveness, acknowledging outcomes can be influenced by non-spending factors. *Source: Selected Issues paper “BENCHMARKING PUBLIC SPENDING EFFICIENCY IN EDUCATION, HEALTH, AND INFRASTRUCTURE IN IRELAND”, May 20, 2025.* ### 1. Public Spending _____________________________________________________________________ 3 ### 1. Public Spending ### A. Introduction: objectives and context - Purpose: benchmark Ireland’s public spending efficiency in infrastructure, health, and education against peers using Data Envelopment Analysis (DEA). - Rationale: - Enhancing public spending efficiency can: enable same quality with less spending, achieve better outcomes with current spending, or a mix of both; and help improve fiscal buffers for shocks. - Ireland’s underlying fiscal position has been supported by a large increase in corporate income tax (CIT) revenues, which are “highly concentrated and vulnerable to external policy shifts as well as firm- or sector-specific shocks.” - With the economy operating at full capacity, improving public spending efficiency would help address infrastructure and housing needs while avoiding pro-cyclical fiscal policy. ### Key baseline statistics and measurement notes - Total public spending: 40 percent of GNI* in 2023. - Comparability note: Indicators for Ireland are measured as share of GNI*, compared to other EU countries where a share of GDP is employed. - Peer comparators used: Austria, Belgium, Denmark, Luxembourg, the Netherlands, and Sweden. - Analytical approach: - DEA constructs an “efficiency frontier” showing maximum possible output for a given input; provides relative distance from frontier (potential efficiency gains). - Inputs: various measures of public spending per capita. - For health and education, outcome indicators were used (rather than outputs) to better capture quality and effectiveness. ### Findings on spending levels (functional budget) - Most spending categories are below euro area medians—except: - Health: as a share of GNI* is at the top range of euro area peers and has consistently grown faster than total spending in recent years. - Education: at the median of euro area peers. - Caveat on health spending comparability: health spending in Ireland likely overstated as it captures some social spending. --- ### B. Infrastructure: gaps, trends, and efficiency - Findings from IMF Tool for Investment and Efficiency (2021) and other sources: - Physical infrastructure gap relative to the frontier: 32 percent. - Quality gap relative to the frontier: 27 percent. - Global/regional comparisons in the IMF tool: - Ireland’s physical gap: 32 percent (global average gap 38 percent, European Union 21 percent, peer comparators 25 percent). - Ireland’s quality gap: 27 percent (global average gap 22 percent, EU 15 percent, peer comparators 8 percent). - Supporting evidence: - Irish Fiscal Advisory Council (IFAC, 2024): infrastructure per capita ~25 percent below high-income European country average; capital stock to national income ~20 percent below average. - IMD World Competitiveness index 2024: Ireland overall rank 4th of 67, but infrastructure rank 17th; basic infrastructure rank 38th. - National Competitiveness and Productivity Council (2024): deficits in housing, energy, water, and wastewater cited as key competitiveness challenges. - Recent spending trends and commitments: - General government gross fixed capital formation: about 4 percent of GNI* in 2023. - Government commitment: €165 billion in capital investment over 2021–2030 through the National Development Plan (plan is currently being updated). - Programme for Government priority sectors: housing, water, energy, and transport. - Investment efficiency: - Mapping physical infrastructure and quality indicators against public capital stock shows Ireland below the investment efficiency frontier in both quantity and quality measures—suggesting potential efficiency gains. - An alternate measure (Global Infrastructure Quality Index, 2023) yielded similar results. - Implementation and delivery challenges (post-2017 PIMA progress but remaining issues): - Progress: alignment of investment and planning (National Development Plan and Investment Framework), National Investment Office, annual spending reviews, investment project tracker. - Remaining challenges: planning delays, low construction productivity (need to utilize modern methods of construction), and labor shortages in the construction sector. --- ### C. Health: outcomes, capacity constraints, and inputs - Outcome indicators and trends: - Health-adjusted life expectancy (HALE) at birth: 70 years (up from 66.25 in 2001). - Prior to the pandemic, Ireland’s life expectancy increased by more than the EU average; during the pandemic its decline was comparatively smaller (OECD, 2023). - Age-adjusted mortality rates (overall and for preventable and treatable causes): consistently lower than the EU average. - Self-reported health status: highest in the EU; favorable versus other OECD countries, but with widening socio-economic disparities. - Self-reported health by income quintile (2022): 90 percent of adults in the highest income quintile reported being in good health; 66 percent in the lowest quintile. - In old age: lower prevalence of health-related activity limitations relative to the EU average; Irish men and women likely to lead longer and healthier lives. - Capacity constraints and system pressures: - Extensive waitlists at public hospitals; backlog from the pandemic. - Deficit in bed capacity likely a key reason for overcrowding in public hospitals. - Public hospital beds per capita: undercapacity in 2022, significantly lower than the EU average. - Acute care hospital bed occupancy: 90 percent, above the recommended threshold of 85 percent for maintaining an emergency buffer (OECD, 2023). - Hospitalization rates for avoidable diseases (e.g., COPD): relatively high, indicating underdeveloped primary care. - Workforce challenges: recruitment and retention difficulties for permanent staff; doctor shortages in certain specializations despite relatively high production of medical graduates per capita compared to the EU. - Note: data does not yet reflect recent increases in the number of acute beds by the government; further expansion is planned. --- ### D. Methodological note on DEA usage and limitations - DEA characteristics relevant to interpretation: - Non-parametric; does not impose functional form between inputs and outputs. - Does not provide marginal change estimates; indicates relative “distance” to the frontier as potential efficiency gains. - Sensitive to sample selection; use of EU and OECD samples intended to improve comparability. - For health and education, outcomes were preferred over outputs to better capture quality and effectiveness, acknowledging outcomes can be influenced by non-spending factors. --- *Source: Selected Issues paper “BENCHMARKING PUBLIC SPENDING EFFICIENCY IN EDUCATION, HEALTH, AND INFRASTRUCTURE IN IRELAND”, May 20, 2025.* ### 11. Health expenditures in Ireland are high overall, considering its relatively young ### 11. Health expenditures in Ireland are high overall, considering its relatively young population ### Overview and key statistics - Health spending is elevated relative to comparators, OECD and EU peers (Figure 8). - Public sources account for two-thirds of total health spending in Ireland. - Share of government expenditure on health rose from 19.6 percent in 2019 to almost 23 percent in 2023. - Since 2020, an additional 1,218 in-patient acute beds have been added. - The Acute Inpatient Hospital Bed Expansion Plan (announced May 2024) aims to deliver 4,367 acute hospital in-patient beds by 2031. - Ireland’s age structure (favorable relative to other EU countries): share of population below age 20 is 26 percent; median age is 38.8; share of population aged 65 and above is 15 percent. - Health spending measures in the chapter do not adjust for population age structure. ### Drivers of high spending and cost structure - Potential contributory factors cited: - Hospital-based system orientation. - Relatively out-of-date clinical infrastructure from a legacy of past underinvestment. - Reliance on more costly agency staff given hiring and retention challenges. - High general wage levels in the health sector (Sicari and Sutherland, 2023; IFAC, 2024; OECD, 2022 and 2025; Wren and Fitzpatrick, 2020). - Between 2016 and 2022: - Inflation-adjusted rise in costs was 45 percent relative to a 3.8 percent increase in activity (IGEES, 2024). - Total nominal increase of expenditure was 68 percent in 2016–2022, with an average budget variance of 10.8 percent in the acute hospitals. - The wage bill accounted for two-thirds of the rise in total expenditure, reflecting pay increases, an expanded workforce, a higher share of consultants, and more use of agency staff and overtime. - Staffing in acute services increased by 33 percent between 2016 to 2022. - Non-pay expenditure has also risen, particularly from increases in non-clinical expenditure that were out of line with general trends. - Overruns may reflect inadequate forecasting within the budget, despite a two-year expenditure agreement to boost the budget for the health sector. ### Efficiency analysis and estimated gains - Using HALE as an output and current health expenditure per capita in PPP terms as an input, the efficiency frontier suggests room for substantial efficiency gains (Figure 9). - Results are consistent when using alternative measures (age-adjusted mortality rates), and when comparing total and government current health spending per capita as inputs, and with countries having similar health systems. - OECD study (Sicari and Sutherland, 2023) estimates potential efficiency gains: - Up to 15 percent on the input dimension (saving up to 15 percent of current health expenditures while maintaining unchanged life expectancy). - 1 percent on the output dimension (increase life expectancy by around 1 percent while keeping level of spending constant, but adjusting composition to OECD best practice). ### Future pressures and long-term projections - The healthcare system will confront future demands from population growth and aging, and pharmaceutical cost pressures. - European Commission projections for Ireland: - Baseline public expenditure health costs projected to grow by 1.5 percentage points of GDP between 2022 and 2070 (second largest increase at the EU level). - Under a risk scenario, projected rise is 2.5 percentage points of GDP. - Share of population aged 65 and older projected to almost double from 15 percent in 2022 to 29 percent in 2070. - Old-age dependency ratio projected to more than double to 56 percent in 2070 from 26 percent in 2022. ### Fiscal and policy implications highlighted - Persistent budget overruns and high levels of spending point to potential gains in spending efficiency. - Improvements in health spending efficiency will help ensure continued delivery of quality healthcare amid growing demands and contribute to fiscal buffers for shocks. - Specific issues noted that relate to potential efficiency and control improvements: - Staffing recruitment and retention challenges; increased use of locum and agency staff and overtime despite workforce expansion. - Questions on control management and expenditure compliance in acute services. - Forecasts for health system spending may not sufficiently account for costs of maintaining the existing level of service delivery, resulting in below-adequate allocations. *Source: IMF Selected Issues Paper chapter on Ireland health and education (extracted content).* --- _Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025090.pdf_