Spreading the funds thinly across the health sector

There wasn’t much to get excited about in the Budget 2027 announcements for healthcare

The Budget 2027 allocation for current expenditure in healthcare is €27.39 billion, up from €25.79 billion in 2026. This gives an increase of €1.6 billion, or 6.2 per cent, which is broadly in line with planned overall increase in current expenditure.

The allocation means that 26 per cent of total Government current expenditure next year will go to healthcare, the second largest allocation after social protection, which will get €30.94 billion, or a little over 29 per cent.

Interestingly, the third of the traditional ‘big three’ departments – education and youth – received an allocation of €12.835 billion, less than half of the allocation for healthcare.

On the capital side, healthcare received an allocation of €1.72 billion for 2027, an increase of €160 million compared with the 2026 allocation.

This represents just 8.5 per cent of the total capital budget for next year, significantly below the proportion of current spending going towards health.

Coming into the Budget, it had already become clear that the 2026 allocation for current healthcare spending was being overshot, with a figure of €577 million being reported at the end of July.

However, this overspend was not built into the 2026 figure on which the 6.2 per cent increase was based. The Irish Fiscal Advisory Council noted earlier this year that healthcare overspends in Ireland are partly due to unrealistic budgeting, particularly not taking previous overspends into account. It appears that history is repeating itself in this regard.

This also means that the increased allocation relative to the outturn for 2026 will be significantly more modest. If the €577 million figure from the summer were assumed to be the final overrun, then that would mean that actual spending in 2026 would be €26.367 billion, and the 2027 allocation would represent an increase of €1.023 billion, or just 3.9 per cent.

This could be further reduced when taking account of the fact that the Expenditure Report notes that some of the additional allocation in Budget 2027 will be used for 2026 decisions and the public service pay agreement, with just €1.204 billion additional funding for new and existing policies, including service expansion.

This will almost certainly not be sufficient to cover the increased demand from demographic pressures (a growing and ageing population) and the increased cost of providing care (medical inflation). Another overrun next year is therefore highly likely.

The Expenditure Report notes that a number of efficiencies and reforms will be expected during 2027. These include a reduction in dependence on agency staff, moving care closer to home (which is in line with the Sláintecare vision), expanding the network of surgical hubs, making more use of theatres, clinics, and diagnostics, both during the week and at weekends, and advancing the digital health agenda.

However, previous plans to eke out efficiencies have not halted the trend of overruns, so it will be interesting to see if these have more of an impact.

During the year, it emerged that four of the six health regions were significantly overspending their budgets and that they were to lose autonomy over day-to-day spending. The increases in the allocations to the health regions for 2027 are, for the most part, proportionately significantly higher than the overall increase (notwithstanding the comments above regarding the starting point not reflecting the outturn).

There is also an above-average percentage increase in the allocation to the Primary Care Reimbursement Services. These will be offset by a significant reduction in the allocation to ‘HSE other’ and a modest reduction in the allocation to the Department of Health and other agencies.

Of the specific spending measures listed in the Expenditure Report, some of the more significant include €196 million for older persons services, including an additional 1.8 million home support hours; €108 million for mental health services; and €36 million for social inclusion, the National Drugs Strategy, and community health and wellbeing.

Overall, while an increased budget allocation for health is welcome, the headline figure for the increase is not the full story, and it is likely that some health service managers could be looking down the back of some proverbial sofas next year.